“If Fonterra achieves the very top end of its earnings guidance for 2026, it would likely achieve its target this year,” Forsyth Barr analyst Will Twiss said.
Earlier this month, Fonterra said it expected full year underlying earnings to be at the top end of its previously announced range of 60-70 cents per share, which it said would support a strong full year dividend.
Fonterra’s strong share price performance in recent weeks likely reflected the company upgrading its earnings outlook in September, Twiss said, adding a weak New Zealand dollar would benefit the co-op’s 2026 earnings.
Fonterra has increased its farmgate milk price forecast for the current season to reflect stronger dairy commodity prices.
The co-operative said the forecast midpoint has gone to $9.50 per kg of milksolids (kgMS) from $9.25/kgMS.
The forecast range lifted and narrowed from $8-$10.50 per kgMS to $8.50-$10.50 per kgMS.
“Since our last update in July, Global Dairy Trade auction results for key commodity products, particularly whole milk powder and skim milk powder, have improved,” chief executive Richard Allen said.
“Globally, we continue to see strength in demand.
“This improving outlook reflects continued delivery from our focused execution across our B2B [business to business] businesses,” he said.
“Geopolitical volatility remains and, with only two months complete, previous seasons tell us that things can always change,” Allen said.
The El Niño weather pattern so far does not look to have affected dairy production, going on NZX Dairy data.
NZX said production for the 2026-27 season-to-date through August was up 3.3% (up 4.3% on a milksolids basis).
Production for the 12 months through August was up 3.6% (up 4.5% on a milksolids basis).
Last week, DairyNZ said a strong El Niño weather pattern could push farm working expenses and break-even prices sharply higher.
DairyNZ’s modelling showed a very strong El Niño could push farm working expenses to $6.78/kgMS and the national break-even milk price to $9.07/kgMS.
The farmer-funded organisation urged farmers to prepare for tighter margins and potential feed shortages.
The anticipated El Niño event added uncertainty to a dairy season already marked by major global events and cost pressures, with the potential for drier conditions to affect pasture growth, feed supply and milk production, it said.
Fonterra completed the sale of its global consumer and associated businesses, Mainland Group, to French dairy giant Lactalis for $4.22 billion in March.
The sale enabled a $3.2b payment to farmer shareholders and unit holders via a $2.00-per-share capital return.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
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