“Compared to Fonterra's previous payout forecast, today's announcement implies an increase in revenue of around $1 billion over the coming year.
“Our own current forecast for the 2015-16 milk price is $4.30, but with global dairy prices up nearly 50% from their recent lows the risks to this clearly lie to the upside (we will formally review our forecast after next week's [GDT] auction).
“This is a key reason why we expect the Reserve Bank will decide to keep the [official cash rate] on hold at its October meeting before resuming cuts in December.”
ASB expects the 2015-16 milk price to rise further.
“We still expect the season will ultimately result in a $5.00/kg price, though to attain that will require further US dollar dairy price gains over the rest of the season.
“A NZ production squeeze is a key reason why traded dairy prices have risen and why we expect they will continue to rise.
“Fonterra expects its milk collections to drop at least 5%, which tallies with our own nationwide forecast.”