Wednesday, 11 November 2015 08:55

Cost price the key

Written by 
Fonterra chief executive Theo Spierings. Fonterra chief executive Theo Spierings.

NZ dairy farmers need to keep the focus on the cost of production, because New Zealand is the only system in the world that can live through the current volatility, says Fonterra chief executive Theo Spierings.

"I know it's not nice but the scene in Europe is much worse than what you see here because their cost price is almost double," Spierings told Dairy News.

The middle to long term prospects are "absolutely good", he says.

"Our strategy is connected to the market opportunities and our strategy is working," he says. "But at this point in time .... There are multiple areas in the world, demand pools, which have dried up for a while.

"While the middle to long term is positive, the farmers will have to manage through these low prices and the only way to do that is manage your cost price.

"We will try to do get as much money from the market as possible, but cost price on farm is crucial. We have to turn the wheel, get value from the market. Our farmers are focusing on cost."

Farmers will hopefully have enough to keep going with the current forecast of $4.50/kgMS farmgate milk price, with the 50c support and 40-50c earnings per share, bringing the payout to a potential $5.60 including the loan.

"I really do believe in the second half of this year we could see a completely different scene with a significant weather event."

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