Fonterra has lifted its forecast farm gate milk price for the year to May 31, 2021 from $7.30 to $7.90 a kilogram of milk solids – up from $6.90 to $7.50. The midpoint range, which farmers are paid off, increased to $7.60. Chief executive Miles Hurrell says it is good news for farmers and will contribute $11.5 billion to the economy. He says it is very much a China demand led story but there is also good demand for New Zealand dairy across South East Asia and the Middle East. This week dairy prices jumped a whopping 15 per cent, including a 21 per cent rise in the price of whole milk powder. Westpac lifted its farm gate milk price forecast by 40 cents to $7.90 a kilogram of milk solids and ANZ revised its forecast up by 50c to $7.70. Miles Hurrell says there are downside risks to the midpoint range, including production in the European Union and United States ramping up and the impact of Covid-19 on key markets. The midpoint of $7.60 also increases costs, putting pressure on Fonterra’s profits in the second half of the financial year. Fonterra’s half-year results are released on March 17.