Thursday, 28 January 2016 09:15

Fonterra revises forecast payout

Written by 
Chief executive Theo Spierings says while global demand remained sluggish, Fonterra supports the general view that dairy prices will improve later this calendar year. Chief executive Theo Spierings says while global demand remained sluggish, Fonterra supports the general view that dairy prices will improve later this calendar year.

Fonterra has dropped its forecast farmgate milk price for the 2015-16 season by 45c to $4.15/kgMS.

When combined with the earnings per share range of 45-55 cents, this means a total available for payout of $4.60-$4.70/kgMS and would currently equate to a forecast cash payout of $4.50-$4.55/kgMS to our farmers after retentions.

Chairman John Wilson says global economic conditions continue to be challenging and are impacting demand for a range of commodities, including dairy.

"Key factors driving dairy demand are declining international oil prices which have weakened the spending power of countries reliant on oil revenues, economic uncertainty in developing economies and a slow recovery of dairy imports into China. In addition, the Russian ban on European Union dairy imports continues to push more product on to the world market.

"There is still an imbalance between supply and demand which continues to put pressure on global milk prices. Since last September, prices on GlobalDairyTrade for whole milk powder have fallen 12%, and skim milk powder prices are down 8%.

"Although New Zealand farmers have responded to lower global prices by reducing supply, that has yet to happen in other regions, including Europe, where milk volumes have continued to increase.

Chief executive Theo Spierings says while global demand remained sluggish, Fonterra supports the general view that dairy prices will improve later this calendar year.

"However the time frame for supply and demand rebalancing has moved further out and largely depends on a downward correction in EU supply in response to the lower global prices. These prices are clearly unsustainably low for farmers globally and cannot continue in the longer term.

"It is important to state that despite the current challenges, we have confidence long-term international dairy demand will continue its expansion due to a growing world population, increasing middle classes in Asia, urbanisation and favourable demographics.

"While a unique series of global issues are impacting the forecast Milk Price, the business is performing well, as outlined in our business update in November, and is on track to generate improved dividend returns. Fonterra has remained focused on reducing costs, increasing efficiencies and shifting more milk into higher value products," says Spierings.

Wilson says, "The reduction in the forecast Farmgate Milk Price will be very tough on our farmers. As we confirm the co-op's performance for the first half of the financial year, we will look at the best way to help our farmers' cash flows, underpinned by the expected improvement in dividend returns and the financial strength of the co-operative.

"We will continue to keep our farmers updated as the season progresses," says Wilson.

More like this

Carbon zero milk

Fonterra has joined forces with a supermarket chain to deliver what it claims is NZ’s first carbon zero milk.

Winners committed to environment

It's not the first time Fonterra’s John Wilson Memorial Trophy recipients, Nick and Nicky Dawson have been recognised for their sustainability efforts.

Dairy champions

Hawke's Bay dairy farmers Nick and Nicky Dawson have been awarded Fonterra’s John Wilson Memorial Trophy for responsible dairying.

Featured

 

Limited feed puts ewes at risk

Severe feed shortages in parts of the country mean many ewes are on a nutritional knife-edge heading into lambing and could be at risk of developing metabolic disorders.

Jack’s unique solution

Jason Jack was left with severe spinal injuries after a wakeboarding accident when he was 29, but that hasn’t stopped him getting out and about in difficult environments.

National

$10 payout!

A small but select group of Fonterra farmers are on the cusp of setting a new milk payout record.

The migrant workers dilemma

Dairy farmers want more Kiwi workers, but they also want relaxed immigration restrictions. So, what's the problem?

Producing milk, the Miraka way

The goal of Māori-owned dairy company Miraka, near Taupo, is to become the most sustainable dairy company in the world.

Machinery & Products

Landpower invests in cow central

One of Australasia’s largest, privately-owned farm machinery distributors, Landpower is building a new $10 million complex adjacent to Hamilton Airport.

Maize moisture in a moment

With forage maize playing such an important part of the New Zealand fodder supply chain, a useful hand-held moisture measuring…

» The RNG Weather Report

» Latest Print Issues Online

Milking It

A ticking timebomb?

There could be another dairy health scare brewing in China and this one starts in our backyard.

Please explain

Does anyone in the Government understand the essential role St John Ambulance has in our society?

» Connect with Dairy News

» eNewsletter

Subscribe to our weekly newsletter