Spiralling expenses are the biggest concern to farmers right now, says Federated Farmers’ national dairy chair Chris Lewis.
The call from Federated Farmers follows today's announcements from Synlait and Fonterra on the forecast milk price for the season; Fonterra is keeping its payout at $4.70/kgMS while Synlait has lifted its forecast from $4.40 to a $4.50 to $4.70 range.
"Farmers were hoping for some good news, but today's announcement enforces the need to maintain their frugal mindset," says Andrew Hoggard, Federated Farmers Dairy chair.
"The worst is not over yet, with farmers going into winter with the lower payouts starting to take affect and the drought affected regions, meaning farmers will be needing to buy in more supplementary feed than usual.
"What will be the biggest disappointment to farmers today is Fonterra's drop in its dividend. The dividend's role is to reflect the value in Fonterra's value add products. The belief amongst farmers has been that a low farmgate milk price would then reduce the cost of producing value add products which would be reflected in a higher dividend returned to farmers.
"Obviously today's result shows that this isn't the case; Fonterra will need to explain that well, and clearly, to their shareholder farmers."
Hoggard says there not a lot of money in the system this year so the 5c drop in the dividend is going to hurt. "All farmers can do now is sit tight, plan ahead and budget well."