Fonterra expects higher milk volumes

Fonterra forecasts its New Zealand milk supply to rise 7.5 per cent this year. Source: AAP

FONTERRA anticipates bigger growth in milk supply this season with dry conditions not as bad as last year's drought and the incentive of a higher forecast farmgate pay-out.

New Zealand milk volumes are forecast to rise 7.5 per cent to 1.57 million kilograms of milk solids in the 2013/14 season, up from a previous expectation of 6.4 per cent growth, Fonterra says.

Based on the forecast payout to farmers of $NZ8.65 per kgMS, that implies Fonterra will pay some $NZ13.61 billion ($A12.83 billion) to source local milk in the season.

Fonterra's New Zealand-sourced milk costs were $NZ8.64b in the year ended July 31, 2013, when it paid $NZ5.84 per kgMS to farmers.

The Auckland-based company, which is the world's biggest dairy exporter, collected 151 million kgMS in February compared to 137 million kgMS a year earlier when the North Island was in the grip of the worst drought in seven decades.

Total collection in the season to date was up 4.9 per cent to 1.27 million kgMS.

"While we are seeing dry conditions impact some regions of the country, particularly Waikato and Northland, these are not as widespread as the same time last year," Fonterra said.

"The lift in forecast farmgate milk price may have a positive influence on milk supply increasing above our previous forecast."

Fonterra reports its first-half result on March 26. It has previously forecast 2014 earnings before interest and tax to fall to between $NZ500 million to $NZ600 million from $NZ1 billion in 2013.

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