While the company had planned to provide an updated forecast at the start of February, an update now was more appropriate and beneficial for its 200 Canterbury suppliers, chairman Graeme Milne said in a statement.
»We’ve kept a close eye on the global dairy market and the trending increase in dairy prices can’t be ignored,» he said.
This month, Fonterra increased its farmgate milk price forecast by 75c to $6. A $6 milk price brought farmers to above break-even levels, although many farmers had increased debt and deferred maintenance expenditure over the last season or two, DairyNZ chief executive Tim Mackle said.
Mr Milne said reduced European production over the past three months showed European dairy farmers were responding to lower milk prices.
»Production is also reducing here in New Zealand, but Europe has a much greater impact on overall dairy prices and we’ve seen this in action with dairy prices over the past three months.
»We are also mindful China’s demand for dairy products is another key driver for global dairy prices.
»While their demand has risen recently, it’s unclear if – and for how long – it might continue,» he said.
Managing director John Penno said the increased forecast would be well received by suppliers who had been through two tough seasons.
The company remained cautious about the medium to long-term outlook and encouraged suppliers to take that into account as they made plans.
Synlait Milk recently dual listed on the Australian Securities Exchange and commenced trading last Friday.