Fonterra may review prices next week

Last updated 10:26 21/03/2013

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Kiwis could hear from next week if fresh milk and other dairy prices at the supermarket chiller are heading up because of surging world prices.

Fonterra Brands managing director Peter McClure said his business, which has to buy its manufacturing milk from the parent company at world prices, would review domestic prices when Fonterra makes its next payout forecast announcement.

That is likely to be next week when New Zealand's biggest company announces its half year financial results.

McClure said the price Fonterra  Brands had to pay for its milk increased by a few cents in February as world prices continued to strengthen, but before that there had been almost no movement in price for a year.

Two litres of house brand or budget milk was still selling for around $2.99, on a par with milk prices four years ago, he said.

Fonterra collects nearly 90 per cent of all milk production in this country and dominates the wholesale supply market to manufacturers and supermarkets.

Drought-struck Fonterra's farmers will also be hanging on next Wednesday's announcements by the company.

Not only will they be anticipating a lift in the milk payout forecast, but they will be looking for an announcement that directors are prepared to bring their June advance payout payments forward to relieve cashflow pressure.

Many North Island farmers have been forced to dry off their herds a month early because drought has robbed their feed supplies, and currently they are scheduled to have no more income until June.

Waikato dairy cooperative Tatua has cranked up the pressure on Fonterra directors to bring forward the June advance payment, by agreeing to pay its farmers a 30c/kg milksolids advance on payout every month until September to relieve drought income concerns.

Fonterra is currently forecasting a $5.50/kg milk payout plus a 40c per share dividend to its farmers.

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