The Fonterra 2025/26 milk price forecast is $10 per kg of milk solids. Photo: RNZ / Rebekah Parsons-King
- Dairy farmers are in for another bumper season
- Fonterra releases its third quarter update, with a strong profit
- Work on the sale of consumer business is ongoing
Farmers are in line for another bumper dairy season after Fonterra revealed its opening forecast for the new season.
Fonterra's 2025/26 milk price forecast is $10 per kilogram of milk solids, driven by ongoing strong demand.
"Looking at the season ahead, we expect this demand to continue for now, but we acknowledge the ongoing geopolitical uncertainty and the potential for a wider series of outcomes across the season," chief executive Miles Hurrell said.
The uncertainty meant the new season milk price sat within a wide forecast range of $8 to $11 per kg of milk solids.
The mid-point of its current season milk price forecast range remained unchanged.
"Our forecast Farmgate Milk Price for the current season is driven by strong demand for our milk price reference products and our range is unchanged at $9.70-$10.30 with a midpoint of $10.00 per kg of milk solids," Hurrell said.
Strong increases in revenue and profit
In its third quarter update, Fonterra said its after-tax profit for the nine months ended April was $1.08 billion, up 11 percent from a year ago, while revenue rose 16 percent to $19.7b.
Excluding one-offs, its normalised profit was $1.16b which was equivalent to 70 cents per share, and an operating profit of $1.74b, up 18 percent.
The co-op also narrowed its year-end earnings range to 65 to 75 cents per share, at the upper end of the guidance provided in March of 55 to 75 cents per share.
"We've delivered strong shareholder returns through FY25, including a 22-cent interim dividend, and as we get closer to the end of the year, we are focused on maintaining this momentum," Hurrell said.
"We're also pleased to tighten our year-end forecast earnings within the existing range, given the strength of our third quarter performance," he said.
Consumer business sale
Fonterra said its focus has been implementing its plans to sell its consumer business, which delivered just over $3b in revenue (up 11 percent) and $319 million (up 28 percent) in operating profit for the nine months ended April.
Hurrell said work on the sale of the consumer business was ongoing.
"We have been thoroughly testing the terms and value of both a trade sale and initial public offering (IPO) as divestment options," he said.
"This work is on track as planned and we will seek farmer shareholder approval to divest through a vote in due course."
Hurrell said the results showed Fonterra had an "impressive business" as a business-to-business dairy company.
Fonterra's ingredients business delivered just under $13b (up 17 percent) in revenue for the period, with operating profit up 37 percent to $1.02b.
"If we divest our consumer business, we will still be a co-op with global reach and scale, and a diverse product mix sold to customers in more than 100 countries," Hurrell said.
'Smiles on farm' as current season price firms, but next season's is wider
Fonterra announced on Thursday morning its forecast farmgate milk price for the current milk season (2024/2025) was a range of $9.70-$10.30 per kilogram of milk solids, with a midpoint of $10.00 that were unchanged from earlier forecasts.
Looking to next season (2025/2026), the opening forecasts were in the range of $8.00 - $11.00 per kilo of milk solids with the midpoint remaining at $10 per kilo of milk solids.
DairyNZ's EconTracker showed the break even milk price for farmers was forecast to be $8.54 per kilo of milk solids in 2024/2025 and $8.57 for 2025/2026.
Federated Farmers' dairy chairman Richard McIntyre said it was great the current season price was firmed up and unchanged.
"There will be a lot of smiles on farm this morning getting that announcement, also right around rural communities."
The new season forecasts for 2025/2026 were "awesome", but they were possibly subject to change, as the final payout announcement for farmers would not come until later in 2026, he said.
McIntyre said farmers were effectively "getting less" for next season than this current season, due to inflation.
"There's a large range for next season, $8 to $11.00, and Fonterra's paying out at the upper end of that and they're also paying out a larger percentage as an advance, which is gonna be fantastic from a cash point of view for farmers, they'll get more money earlier.
"That said, there's obviously a little bit of risk that if the milk price does go down, farmers could get caught a little bit in that respect. So we really want Fonterra to communicate really well with farmers if anything is changing from a milk price point of view."
However, he said Fonterra was performing very well, and all New Zealanders benefited from its success and contribution to the economy.
Final payments typically came in September for its farmer-suppliers.
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