Chinese strategy
OPINION: Fonterra may have sold its dairy farms in China but the appetite for collaboration with the country remains strong.
Fonterra may need to provide additional support to cash-strapped farmers if the forecast milk price continues to fall.
However, another lift in the advance rate would be risky as Fonterra could end up overpaying farmer suppliers and be forced to claw back money.
Fonterra Co-operative Council has previously pushed hard for more cash to be returned to farmers quicker.
Council chair John Stevenson says, as a result, Fonterra changed its advance rate guidelines to pay farmers a higher percentage of the forecast milk price earlier.
But he adds that further increases to the advance rate would come with an increased risk of Fonterra over-paying if there are further declines in milk price.
This month, Fonterra shareholders received $6/kgMS as advance rate for milk supplied in July.
However, for the rest of the year, farmers can expect $5.25/kgMS in advance rate from Fonterra.
"There is a long way to go in the season yet," Stevenson told Dairy News.
"If we continue to see challenges aroun milk price then there will likely be increased calls for Fonterra to use the strength of its balance sheet to support its owners."
A governance group has been formed, following extensive sector consultation, to implement the recommendations from the Industry Working Group's (IWG) final report and is said to be forming a 'road map' for improving New Zealand's animal genetic gain system.
Free workshops focused on managing risk in sharefarming got underway last week.
Annual farmer gathering, the South Island Dairy Event (SIDE), is set to make history as it heads to Timaru for the first time.
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WoolWorks, New Zealand’s largest wool-scouring company, has partnered with the Lions Club of Riverton to help raise money for much-needed repairs to the Southland town’s swimming pool.
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OPINION: Fonterra may have sold its dairy farms in China but the appetite for collaboration with the country remains strong.
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