Fonterra will be watching the next two global dairy trade auctions to see whether its forecast for the farmgate milk price is on track at $5.30 a kilogram of milk solids, its boss says.
Fonterra revised down its forecast for this season when announcing its annual results yesterday, slashing the predicted payout from $6 per kilo of milk solids to $5.30. However, it confirmed its record payout for last season's milk of $8.40 per kilo of milk solids.
The co-operative's annual net profit fell 78 percent to $157 million.
Some analysts believe Fonterra's forecast is still too high and will need to be revised to less than $5, unless global wholesale dairy prices recover significantly.
Chief executive Theo Spierings said there was significant downside risk but prices could easily turn around, given the market volatility and the considerable unknowns.
As well, Fonterra was good at forecasting dairy prices, he said.