Fonterra has lifted its full year earnings guidance and locked in a high opening forecast for next season’s milk price, telling farmers and shareholders that a strong third quarter has kept the country’s largest company on track despite turbulent global trading conditions.
In its third quarter business update released on 28 May, the dairy co-operative reported a year to date operating profit of 1.8 billion dollars for the nine months to April, up 103 million dollars on the same period last year. Profit after tax came in at 1.1 billion dollars, or 65 cents per share, and underlying earnings rose to 57 cents per share from 53 cents a year earlier.
On the back of that result, Fonterra narrowed and lifted its full year underlying earnings guidance to a range of 60 to 70 cents per share, up from the previous 50 to 65 cents. The company said the tighter, higher range reflected confidence built on strong contract levels and the co-operative’s ability to keep product moving through disrupted supply chains.
For farmers, the most closely watched number was the opening forecast for the coming season. Fonterra set its 2026/27 opening forecast farmgate milk price at 9.75 dollars per kilogram of milk solids, with an unusually wide range of 8.00 to 11.00 dollars. The company said the breadth of that range was deliberate, designed to capture the potential impact of ongoing geopolitical risk and inflationary pressure across the season ahead.
The current 2025/26 season forecast was held steady. Fonterra kept its midpoint at 9.70 dollars per kilogram and narrowed the range to between 9.60 and 9.80 dollars, signalling that it has a clear view of where this season will land as it heads into the final months.
Both figures sit at historically strong levels. The farmgate milk price is the single biggest driver of farm incomes across rural New Zealand, and a price near 9.70 dollars flows billions of dollars into farming districts, supporting spending at rural businesses, contractors and the wider regional economy. A second consecutive opening forecast in the same territory gives farmers a measure of certainty as they plan budgets, stock numbers and on farm investment for the year ahead.
Chief executive Richard Allen said the result showed the business performing across its key divisions. “Milk production is up considerably this season, and despite disruption in global supply chains, our sales book is well contracted and our shipping volumes are strong,” he said in comments reported by RNZ.
Milk collections were up 4 percent on the season to 1,489 million kilograms of milk solids, and the co-operative recorded its highest third quarter shipment volumes in a decade. Getting that extra volume out the door at a time when international shipping has been unsettled is a large part of why the result held up. The ingredients business benefited from sustained demand for protein in the United States and Europe, while the foodservice division continued to grow both volume and margin.
Allen pointed to the unsettled global backdrop as the main reason for the cautious framing around next season. He acknowledged the uncertainty caused by the ongoing conflict in the Middle East, and said the co-operative’s in market sales teams were anticipating solid demand from across the regions despite the potential for volatility. Rising oil prices linked to that conflict have pushed up freight and input costs and added to inflation worries at home, which is part of the reason Fonterra has left so much room in its 2026/27 range.
The official forecast also gives a firm number to set against recent independent predictions. Rabobank had earlier picked a Fonterra opening price in the region of 9.50 to 10.00 dollars for 2026/27, so the co-operative’s own 9.75 dollar starting point lands squarely inside that band and confirms that the bank’s read of the market was close to the mark.
The update was broadly welcomed by analysts and rural commentators, with the foodservice surge singled out as a sign that Fonterra’s strategy of pushing more milk into higher value products is paying off. The company has spent recent years trying to lift the share of its earnings that comes from branded and foodservice channels rather than relying on bulk commodity sales, and the latest numbers suggest that shift is gaining traction.
For shareholders and the many thousands of farming families who own the co-operative, the message from the quarter is one of steady delivery in a difficult environment. A lifted earnings forecast points to a healthier dividend, while a strong opening milk price underpins farm cash flows for the season ahead. The wide range attached to that forecast is a reminder that the global picture remains fragile and that a sharp move in oil, freight or demand could still reshape the outlook before the season is done. Full year results are due later in the year, when farmers will learn the final shape of both the milk price and the dividend.
What do you make of Fonterra’s third quarter result and its opening forecast for next season? Is 9.75 dollars a fair starting point given the global uncertainty, or are you bracing for the bottom of that range? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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