Fonterra (ASX:FSF) sets milk prices for FY23; shares gain

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  • The opening forecast of Farmgate milk price for FY23 will be between AU$8.25 to AU$9.75 per kgMS. 
  • Fonterra is focused on its growth plans in the upcoming quarters despite several challenges. 
  • Fonterra shares began trading in green, backed by this announcement. 

The shares of Fonterra Shareholders’ Fund (ASX:FSF) were spotted trading 1.556% higher at AU$2.610 per share at 11:00 AM AEST on the ASX today (26 May).

The ASX-listed food and beverage company has released the 2022/23 (FY2023) opening forecast of Farmgate Milk Price and also shared its financial performance updates from the third quarter (Q3FY22). 

The share price of Fonterra has fallen by more than 27% on the ASX over the past 12 months. Also, Fonterra’s year-to-date share price fell over 27%. (AS of 11:00 AM AEST on the ASX today, 26 May).  

Details of Farmgate’s milk pricing in FY23:

Fonterra’s opening prediction of Farmgate milk price for FY23 is set at AU$8.25 to AU$9.75 per KgMS, with a midpoint of AU$9.00 per kgMS.

Furthermore, the company predicts that the long-term outlook for the dairy business in Australia remains positive despite other challenges such as the COVID-19 or recent geopolitical events causing a global supply chain disruption.

As far as supply is concerned, the production of milk in the key producing areas will remain restricted as high feed, fertiliser and energy costs are likely to impact the production volumes.  

Miles Hurrell, the CEO of Fonterra, believes that the strong opening forecast of milk prices demonstrates the continuous demand for dairy products amidst a disrupted global supply. He further mentioned that such type of demand and supply dynamics are likely to support diary prices in the medium to long-term run.

Hurrell also added that the company is operating through a higher volatile market and managing bigger risks than usual at present like:

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As a result, the company’s prediction range is wider for FY23 this time.  

Also read: A2M, BGA, BUB: Why are these ASX dairy stocks in news?

Fonterra’s third-quarter earnings updates: 

Fonterra reported a lower sales volume during the nine months ended on 30 April 2022. This was caused by lower milk collection and timing of sales due to short-term impacts on demand. These impacts include the lockdown in China, the economic crisis in Sri Lanka and the war between Russia and Ukraine.

The company reported a normalised EBIT worth AU$825 million in the given period, down by AU$134 million in the previous corresponding period. This was driven by lower sales volume due to continuous pressure on margins from rising milk prices, the COVID-19 impacts, and the rapid decline of Sri Lankan currency.

Meanwhile, Fonterra reported a normalised Profit After Tax worth AU$472 million in the given period, down by AU$115 million from the previous corresponding period.  

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What are Fonterra’s plans? 

CEO of Fonterra, Hurrell, said that the company is currently focused on its business growth by implementing long-term strategies. The company has planned to achieve various milestones this year. Some of them are: 

  • Continuing the ownership review of Fonterra’s Australian business and divestment of its business in Chile, Soprole. 
  • Targeting the gut health market by the development of new innovative products and commercialisation of Fonterra’s IP. Therefore, Fonterra launched Nature in Singapore- a cultured milk beverage loaded with added vitamins and probiotics.  

Also read: A2 Milk’s (ASX: A2M) CFO resigns, shares fall



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