(Reuters) - Dairy behemoth Fonterra <FCG.NZ> <FSF.NZ> on Thursday raised its forecast milk payment to farmers for the 2019-2020 season as it sees strong global demand.
The company upgraded its forecast farmgate milk price range to between NZ$7.00 and NZ$7.60 per kilogram of milk solids (kgMS), from an outlook of between NZ$6.55 and NZ$7.55 kgMS set in October. “The higher price reflects a global dairy market that is tipped slightly in favour of demand," Fonterra Chairman John Monaghan said.
Fonterra, however, said a weakening Chinese yuan could pressure prices as it tends to reduce Chinese consumer purchasing power for dollar-priced dairy products.
China makes up most of Fonterra's market, as buyers in the mainland prefer internationally made whole milk powder and infant formula, over their local counterparts.
Earlier this year, Fonterra posted a record annual loss and announced a highly awaited turnaround plan, where it put an end to ill-fated overseas expansion plans and pledged to focus on domestic milk production.
The company said it was still focused on reducing debt as it looks to divest more assets.
In a separate statement, the world's largest dairy exporter Fonterra <FCG.NZ> on Thursday reported a 2.6% decline in New Zealand milk production on a litres basis in October, due to adverse weather conditions in some regions.
(Reporting by Niyati Shetty and Shreya Mariam Job in Bengaluru; Editing by Lisa Shumaker)
