Selling the iconic ice cream business Tip Top won’t end Fonterra’s financial woes, says broker Grant Williamson, of Hamilton Hindin Greene.
Dairy farmers must now keep an eye on others because some are vulnerable and may need help, he says. All the news he hears is negative.
“There hasn’t been a lot of positive stuff. All we get is negative stuff at the moment, some about how long this downturn will last. You hear rumours that interest rates will fall and that would be a positive move. My gut feeling is they will come down more but it’s still going to be pretty tight. [We have to] sharpen our pencils over costs, which were getting a bit out of hand.”
Guyton says New Zealand farmers were the envy of the world with their low cost production. But he and many others installing feeding systems now have higher costs. He’s not sure what effect the present low payout will have on the dairy industry, noting that a sudden upsurge in the GDT price could see people go back to the status quo.
“But I think Fonterra’s policy on growth growth growth may be wrong. We need to be producing the right amount of milk for the right profitability.
“Fonterra slightly led us astray…. I’m not suggesting this was deliberate but we were told China is growing and there’s huge gap with no milk and the next ten years will be great. All of sudden we have a milk lake they should have been able to see coming.”
But Guyton is complementary about the response and communication he’s received from Fonterra on issues he’s raised with chairman John Wilson, who personally emailed a response to him and arranged for someone from Fonterra to talk to him.