Matt Montgomerie: Forsyth Barr Senior Analyst on Fonterra raising its Farmgate Milk Price

A better end to the year than expected for the dairy sector. 

Fonterra has raised its forecast Farmgate Milk Price's midpoint for the second time in less than a month. 

It's up 50 cents to $10 dollars, citing strong demand from China and south-east Asia. 

Forsyth Barr Senior Analyst Matt Montgomerie told Ryan Bridge that demand from China has been sluggish for some time, so it’s pleasing to see they’re returning in some way. 

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Episode Transcript

Speaker 1 (00:00):
Fontira has lifted its forecast farm gate milk prices too,
between nine to fifty to ten dollars fifty. The dairy
cooperative says it's seeing increasing demand from China and Southeast Asia.
The move comes despite profits falling from three hundred and
forty six million to two hundred and sixty three million.
That's a thirty percent reduction on the same time last year.
That's for quarter one. Matt Montgomery is the Forsyth Bars

(00:21):
Senior analyst Equities is with us this morning. Matt, good morning,
Good morning, Ryan, thanks for having me. Had good great
result about the well if the result materializes about the
forecast farm gate milk prices.

Speaker 2 (00:33):
Yeah, No, indeed, I think if you look at recent
Glowood Dury trade octions have been strong and ten dollars
would be a record high if you look at the
midpoint in nominal terms. The previous high was nine dollars
thirty back in twenty two. So yeah, father, how high?

Speaker 1 (00:53):
How much high could it potentially go? I mean I'm
reading that this is all about China, in particular stockpiling
ahead of Christmas learning New Year. Does it taper off
next year?

Speaker 2 (01:03):
Yeah? I mean, I'm reluctant to forecast that. I must say,
I mean commodity faster, the inherently qualatile, but the China
demand has been fluggish for some time, so as pleased
and could least see that they're returning in some ways.

Speaker 1 (01:23):
What about the profit for a quarter one miles house
is that was a strong result despite the thirty percent reduction.

Speaker 2 (01:30):
Yeah, I think for Fontierra, you've got to consider that
when milk prices are high like they are, and that
often tends to mean that margins and their consumer and
food service businesses are slightly well good than their inability
to pass the higher prices on. So they reiterated their

(01:53):
full year earnings guidance yesterday for forty to sixty cents
this year. So I think that's the important thing to
consider where that's exactly what they had been signaling back
in September when they reported their results, So it shouldn't
be any major surprises to invest it all funners.

Speaker 1 (02:12):
They're also a business and transition, which is another thing
that Harrell spoke about you spoke about yesterday.

Speaker 2 (02:18):
Yeah, No, there's there's been a lot of change in
the corp for a number of years now. So Darla
wouldn't say that it's reflective of thirty per client. It's
more reflection of, hey, looks this is a volatile business
and it's thanks move around on prices, and the last
year was a very good year as well. I think

(02:40):
that's important to consider too.

Speaker 1 (02:42):
Matt, Thank you very much for that analysis. Really appreciated
this morning. Matt Montgomery for Scith bast Senior Analyst, Equities.
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