Lactalis in front to acquire Fonterra’s Australian dairy assets after ACCC clearance
The world's largest dairy company may be in pole position to acquire Fonterra's Australian assets.
The Fonterra Cooperative Support ‘loan’ to be made available to shared-up farmers shows the co-op is optimistic prices will come back, Fonterra chairman John Wilson says.
“We don’t believe that will be in the too distant future so we are providing a buffer by dragging forward future higher milk prices to this period we are in now,” Wilson says.
Fonterra says it is supporting farmers in a simple manner with simple documentation and process, “to assist our farmers to buffer what is undoubtedly extreme volatility that is knocking [them] around right now; we are uniquely placed to be able to provide that support over this time.”
All Fonterra share-backed farmers can apply for the support of 50 cents per shared-up milk solids for production for the season. This payment, interest free for two years, will be repayable when the farmgate milk price or advance rate goes above $6/kgMS. A first payment will be made in October for June-December and will continue until May. Payments will total 50c cents per shared-up milk solids over the season but will be phased from October.
It will cost about $430 million and will be funded by one-off savings generated by changes the business is making – its ‘transformation project’ -- such as improving working capital.
Fonterra chief executive Theo Spierings says global demographics long term still show a strong position for dairy. Fonterra still sees the ‘average’ milk price rising to $3500/t (whole milk powder) and, depending on where the NZ$ sits, $6-$6.25/kgMS as the normal level.
The co-op still expects an uplift throughout the season and though $3500/t levels “will take a while, our estimate is it will take 6-12 months,” Spierings says.
Wilson says looking at the history of volatility cycles they are comfortable with interest free lending on the Fonterra Cooperative Support over the next two years. “If required beyond that we would impose a wholesale bank rate.”
Spierings claims dairy prices are way below intervention levels in Europe and “already below the bottom”.
Wilson says these prices are unsustainable for New Zealand farmers but, increasingly, prices globally are also unsustainable in other world regions. “They are now below intervention prices. While there is demand, the reality is we are expecting milk supply will start to tighten over the next quarter to half year.”
Spierings says the loans to farmers will be funded solely by reducing working capital via the transformation programme which will strengthen the balance sheet.
Wilson says the Fonterra Coop Support has been created by one-off gains -- “predominantly working capital gains which strengthen our balance sheet so we are able to use that strength to pass a one-off to our farmers”. “This is different from what is also occurring in our transformation project which you will see reflected in our dividend announcement for the year ahead in September.”
Wilson says there are strong communication levels between Fonterra and the banks and strong support from banks for farmers. “We’ve got an opportunity to very simply provide support for our farmers which reflects the volatility, which reflects how low these prices are vs where they have been historically, and also the fact they are at an unsustainably low point.
“This is putting something in place which is simple to do but which leverages off the strength of our cooperative.”
A Fonterra Co-operative Support schedule will be made available as part of the application process. The programme will be reviewed in December.
Listed carpet manufacturer, Bremworth is undertaking a $6 million expansion at its Napier plant more than two years after the site was heavily damaged by Cyclone Gabrielle.
Federated Farmers is vowing to keep the big banks accountable for their actions and to continue pushing for meaningful change in the rural lending sector.
Farmer perceptions of current economic conditions have risen to their highest level in almost a decade.
Two butcheries have claimed victory at the 100% New Zealand Bacon & Ham Awards for 2025.
A Taupiri farming company has been convicted and fined $52,500 in the Hamilton District Court for the unlawful discharge of dairy effluent into the environment.
The Climate Change Commission’s 2025 emissions reduction monitoring report reveals steady progress on the reduction of New Zealand’s climate pollution.
OPINION: The image of regenerative farmers as kind, cuddly progressive types took a hit when one of their own took…
OPINION: Spare a thought for the arable farmer, squeezed on one side by soft global prices and on the other…