Fonterra has announced that it is holding its forecast farmgate milk price at NZ$4.25/kgMS or in Irish constituents the equivalent of 19.86c/L.

This forecast price brings the total payout available to farmers for the 2016/2017 season to $4.75 to $4.85 (22.20c/L to 22.66c/L).

Fonterra also announced a forecast earnings per share range for the 2017 financial year of 50 to 60c.

Fonterra Chairman John Wilson said the solid forecast earnings per share range reflects performance improvements across the business and would be welcomed by farmers.

However, with the farmgate milk price forecast remaining at $4.25 per kgMS, it is another financially challenging season for farmers, he said.

"The co-op is aware of how tough the situation on farm remains. We are focused on delivering as much cash as possible to our farmers by bringing payments forward while maintaining a strong balance sheet.

"This forecast is our best estimate at this early stage of the season. We will continue to update our farmers as we move through the season."

Wilson said the $4.25 farmgate milk price reflects the continuing global uncertainty and the high NZD/USD exchange rate which continues to impact the competitiveness of New Zealand dairy exports.

"The recent weakening of the euro, combined with the continued strength of the New Zealand dollar, has meant a price advantage for European export dairy products."

We expect global milk supply and demand to come into balance over the course of this season.

"Farmers globally are producing less milk in response to lower prices and we are forecasting a 3% reduction in our New Zealand milk collection for this season.”

Chief Executive Theo Spierings said the returns from the ingredients, consumer and foodservice businesses continue to grow in-line with Fonterra’s business strategy to convert more milk into higher returning products.

“We are seeing the benefits of our investments in manufacturing over recent years. We now have more flexibility to make the right products at the least cost, delivering better returns for our farmers’ milk.

“Our good progress in continuing to increase value through our consumer and foodservice businesses, particularly in important markets such as China, Malaysia, Indonesia, Sri Lanka, Oceania and Latin America, is reflected in the lift in the earnings per share forecast."