Fonterra lifts earnings, sets $9.75/kg opening milk price forecast for 2026-27
Fonterra has lifted its third-quarter earnings while maintaining historically high milk price forecasts for this season and next.
The co-op said the quarter’s operating profit came to $1.8 billion, up $103 million from the previous comparable period.
Underlying earnings per share were 57 cents, up from 53c.
Fonterra announced its opening 2026-27 forecast farmgate milk price of $9.75 – within a range of $8.00-$11.00 per kg of milksolids.
For the current season, which ends on May 31, Fonterra’s milk price forecast range narrowed to $9.60-$9.80/kg, from $9.40-$10.00, with the midpoint staying unchanged at $9.70 - its second highest on record.
The forecast compares with the record $10.16/kg paid for the 2024/25 season.
It also raised its full-year earnings forecast to 60-70c a share, from a previous forecast of 50-65c.
New chief executive Richard Allen said Fonterra had a clear strategy to deliver value through its global Ingredients and Foodservice businesses.
“Our full-year earnings guidance reflects the strong shipment volumes expected in the final quarter of the year.
“However, we acknowledge the uncertainty caused by the ongoing conflict in the Middle East.
“Like our farmers, and others around the world, we are experiencing cost inflation and shipping disruptions.”
Production-wise, the current season is tipped to be a record.
In the season to date, Fonterra’s collections came to 1489 million kg of milksolids, up 4% on last season.
Earlier this year, farm balance sheets were boosted by a $3.2b capital repayment from Fonterra’s sale of Mainland to Lactalis last year.
Farmers have also received $700m from a 16c special dividend from Fonterra’s share of the consumer business’ earnings before the sale went through, in addition to a strong 24c interim dividend.
Allen said Fonterra’s sales book was well contracted and its shipping volumes were strong, with the highest third quarter shipment volumes in a decade.
Looking to next season, Fonterra expected milk collections to remain high, in line with this season.
“Our in-market sales teams are anticipating solid demand from across the regions despite potential volatility, and this is reflected in our opening forecast range,” he said.
The Ingredients business benefited from ongoing protein demand in the US and Europe, while Foodservice continued to achieve both volume and margin growth.
Allen said the sale to Lactalis was a significant step, with the co-operative now focused on growing its high-value Ingredients and Foodservice businesses.
Fonterra advanced work on its new $35m pastry butter sheet capacity at Edgecumbe and made progress with its $75m butter expansion at Clandeboye and $150m UHT cream build at Edendale.
The co-op said it was going ahead with the planned expansion of its organic business into the South Island, following interest from farmers wanting to join the programme.
The co-op’s forecast organic milk price range for the current season is $13.90 - $14.10 per kgMS, with a record midpoint of $14.00 per kg.MS
The opening forecast for the 2026/27 season is $13.00 - $15.00 per kgMS, also with a $14.00 per kgMS midpoint.
“These initiatives all reflect real momentum in the co-op’s performance as we head into the final quarter of the financial year,” Allen said.
On the NZX, Fonterra’s units gained 13c to $7.10 in response to the news.
Craigs Investment Partners investment director Mark Lister said it was a positive update from a milk price and earnings perspective.
“They’ve narrowed the milk price for the current season to $9.70 - the second highest all time and for the new season there’s a $9.75 mid-point,” he said.
“You could drive a truck through that range, but it’s still very promising.”
Rabobank this week predicted a $9.50 to $10.00 per kg milk price for next season.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
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