The new range is $6.70 to $7.30 and the midpoint has risen from $6.80 to $7.
When back-paid, the 20c increase in advance payments will deliver $300 million more into farmers’ bank accounts, more than half of it before Christmas.
The widely anticipated upgrade for the milk price accompanied its first quarter trading results, including a 40% increase in normalised earnings compared with the previous corresponding period.
Total group normalised earnings before interest and tax (Ebit) for the three months ended October 31 were $250 million, up $72m.
Fonterra also reiterated its earnings guidance for the full year of 20 to 35c a share.
It says the performance of the company was tracking above the midpoint of the guidance range, but the risks included the ongoing impacts of covid-19 and product price relativities for the rest of the year.
Chief executive officer Miles Hurrell says China was recovering well from the effects of covid-19 and demand had boosted Global Dairy Trade (GDT) prices, especially for whole milk powder.
“The impact of covid-19 continues to play out globally, and we continue to have a watchful eye on the increasing Northern Hemisphere milk production and New Zealand dollar,” he said.
“However, we have contracted a good proportion of our sales book for this time of the season, which has given us the confidence to narrow and lift the bottom end of the forecast milk price range.”
In the first quarter of FY2021, the company produced 832,000 tonnes of dairy products and achieved $4.2 billion of revenue, both measurements comparable to first quarter FY2020, before the impact of covid-19.
Gross profit ($758m) and gross margin (18.1%) both increased due to improved margins and higher volumes in foodservice and consumer products in China and Southeast Asia.
Chief financial officer Marc Rivers says contracts had been signed for the $555m sale of China Farms and that was awaiting regulatory approval, which was an unknown time frame.
Fonterra’s stake in Beingmate Baby & Child was down to 6.63% on October 31, slightly higher than one-third of the original size.
Milk collection season-to-date end October was 527m kg, up 0.5% on the previous year, but the October supply was down 1% and the peak was 83m litres a day.
Milk supply to Fonterra Australia has fallen 2.5% year-to-date, whereas the Australian dairy industry as a whole has increased production by 2.5%.
Hurrell says the new strategy called for a focus on value not volume in Australia and that its operations division was targeting the right amount of milk for the contracted products it needed to make.
