Milk price increase been coming for a while

Today's announcement of a 20 cent increase in Fonterra's forecast milk price (see copy of Sir Henry van der Heyden's email to suppliers below) has been coming for a while.

In fact commodity prices have been in recovery mode almost from the day that Fonterra revised the payout downwards by 45cents on October 22. Prices for wholemilk powder have firmed almost 10% since early October, so we have been expect this good news from Fonterra, which will add about 0.5% to farm returns. A good start to the festive season!

Hi,

• Announced 20 cent increase in 2011/12 forecast payout range today to $6.90 - $7.00.
• Usually only advise movement of plus or minus 30cents but under DIRA want to update quarterly.
• New Payout forecast includes revised forecast Farmgate Milk Price of $6.50/kgMS, up 20cents from previous forecast of $6.30/kgMS.
• Reflects modest recovery in commodity prices over last 2 months.
• Distributable Profit forecast unchanged at 40 – 50cents/share.
• Estimated Fair Value Share price for 2012/13 season unchanged from $4.52.
• Restricted Share Price estimate is $4.26. Up 8cents on this season’s valuation of $4.18.
• Increase in estimated share value reflects Co-op’s reduced debt through retentions.
• But high Kiwi dollar impacted on expected valuation gains.
• Final share price for 2013 season determined in May after Board receives final valuation from independent Valuer.
• Make sure you catch Sky broadcast update on Trading Among Farmers this Friday.
• Channel 950 screening on the hour, every hour from 12 – 8pm.

Talk soon,
Henry