(Reuters) – New Zealand’s Fonterra said on Thursday it expects to pay a higher price to farmers for milk supply next year due to a jump in dairy demand and a strong U.S. dollar.
The world’s biggest dairy exporter expects to pay between NZ$8.75 and NZ$10.25 ($5.49 and $6.43) per kilogram of milk solid (kgMS) in the 2022-2023 financial year, up from a prior forecast of NZ$8.25 to NZ$9.75 per kgMS.
The move marks a reversal from its decision in May to cut the forecast for farmgate milk prices because of inflationary concerns and currency volatility.
Chief Executive Miles Hurrell said commodity prices have soared in response to strong continued demand for dairy, contributing to the higher price outlook.
He also noted that global interest rates and inflation have risen well above the company’s earlier assumptions.
The dairy firm also gave a profit forecast for the fiscal year ending 2023, saying it expects earnings per share of between 30 and 45 New Zealand cents. That is above the earnings outlook of 25 to 35 NZ cents per share for this year.
The fiscal 2023 forecast reflects an expected recovery in some of its key markets, along with favourable margins on ingredients, the company said.
Fonterra will also combine its Africa, Middle East, Europe, North Asia and Americas business with Asia Pacific into one consolidated unit.
($1 = 1.5934 New Zealand dollars)
(This story corrects spelling of ‘dairy’ in the second and sixth paragraphs)