The New Zealand-based company is the world's biggest exporter of dairy products.
World prices for dairy products are expected to remain relatively stable though somewhat lower than in 2005, according to a forecast by the UN's Food and Agriculture Organisation (FAO).
The prices reflect increasing supplies on the market, meeting the increasing demand for dairy products. On internal EU markets, producer prices are expected to fall as the new intervention prices take effect.
In the year to 31 May 2006, Fonterra collected and processed about 14bn litres of milk, including 68.5m litres on 2 November 2005, the day production peaked, the company reported.
The production equates to 1.21bn kilograms of milksolids, 4.3 per cent up on last season's production, and 0.6 per cent ahead of the previous record, set two seasons ago in the year to 31 May 2004.
The additional milk supply and ingredients has already been bought by customers and will be shipped over the next two months, the company said. April and May sales resulted in record months for ingredients sales. Fonterra's managing director for ingredients, John Shaskey, said he was confident the momentum could be maintained despite the competitive trading environment.
"The work we have done to simplify and strengthen our business model, including supply chain efficiencies, is really starting to pay off, and we will be building on that in the new season," he said.
With a record 94 new suppliers set to join the co-operative this year, confidence in the prospects for Fonterra and the dairy industry was high, said company director Barry Harris.
"Overall, it seems likely a more favourable exchange rate will help to balance the fact that commodity prices are coming off the historical highs of the past 12 months," the company stated in a press release. "But the market conditions forecast for 2006/07 mean we can expect an even tougher trading environment this season and we will have to work very hard in the coming year to ensure we continue to get the best possible returns for our shareholders and for the New Zealand economy as a whole."