Top dairy exporter Fonterra flags El Nino risks to milk supply

BENGALURU: New Zealand's largest dairy exporter, Fonterra, has cautioned that the El Nino weather phenomenon could impact milk supply growth by the end of the 2026/27 season. This weather pattern, which involves a warming of sea surface temperatures in the eastern Pacific caused by weaker trade winds, is expected to strengthen further in 2027 and may be the most severe on record.

According to the World Meteorological Organization, El Nino can trigger extreme weather events like droughts and typhoons. Despite this risk, Fonterra anticipates its fiscal 2027 underlying earnings per share to range between 65 NZ cents and 85 NZ cents, with the midpoint slightly above the 71 NZ cents per share reported in fiscal 2026.

Fonterra's CFO Jeremy Sullivan noted that weather, specifically El Nino, is uncontrollable and could reduce milk production, affecting processing and sales. The company's profit after tax for fiscal 2026 more than doubled from the previous year to NZ$2.61 billion (US$1.48 billion), driven by gains from the Mainland Group sale to Lactalis and robust demand for protein-rich products.

Fonterra plans to invest NZ$1 billion over the next three years to expand its protein manufacturing in New Zealand's South Island, creating around 50-60 permanent jobs. The company also declared a final dividend of 33 NZ cents per share, raising its total payout for the year to 73 NZ cents, up from 57 NZ cents a year ago.