Fonterra raises NZ 2016/17 milk price forecast by 50c to NZ$4.75/kg

New Zealand’s dairy giant Fonterra reported earlier on Thursday that it increased their 2016/17 milk price forecast to NZD$4.75. Fonterra's announcement is a great morale booster says Federated Farmers and should add almost $1 billion to the economy.

Fonterra chairman John Wilson said current global milk prices remained at unrealistically low levels, but had started to improve as global demand and supply continued to rebalance. Wilson noted that prices have increased on GlobalDairyTrade but the increasing NZD/USD exchange rate continues to offset some of these gains. Fonterra added that it expects the dairy market to be volatile over the coming months.

Federated Farmers dairy chairman for the Southland region Graeme McKenzie said the forecast would have come as a surprise to some farmers, given it is early in the season. Dairy farmers greeted Fonterra's improved farmgate milk price with cautious optimism.  After two successive seasons of financial losses, diary industry has a long way to go before it returns to profitability.