Wednesday, 10 December 2014 08:40

Bad news for Fonterra farmers

Written by 

FONTERRA HAS reduced its 2014-15 forecast payout to $4.70/kgMS.

The 60c drop from its previous forecast of $5.30/kgMS had been widely expected.

The co-op is still sticking to its estimated dividend range of 25-35 cents per share; this amounts to a forecast cash payout of $4.95 – $5.05 for the current season.

Chairman John Wilson says that although farmers were expecting this lower forecast, the revision will put pressure on their farming business budgets.

"There is still considerable volatility in global dairy markets," says Wilson.

"Right now we are seeing a number of factors that are delaying a sustained return to higher global prices."

The global milk supply remains greater than demand, which has resulted in GlobalDairyTrade prices for Whole Milk Powder falling 16.9% since late September, while Skim Milk Powder prices have fallen 7.7%.

"Falling oil prices, geopolitical uncertainty in Russia and Ukraine, and subdued demand from China as it continues to work through inventory are all contributing to ongoing volatility and weak demand," says Wilson.

"Today's revised forecast reflects the Board and management's best estimates at this time. Given the uncertainty we are advising farmers to continue to be cautious with budgeting and we will update them as the season progresses."

Chief Executive Theo Spierings says Fonterra was undertaking a targeted programme to generate more cash to support farmers.

"Cash is important for our farmers and for our cooperative," Mr Spierings said. "We will be further strengthening our tight controls on operating expenditure, and will be driving harder on working capital, and deferring capex – provided this does not slow progress on our V3 business strategy.

"This is a clear signal to farmers that we are all in this together. We are tightening our belts, just as they are."

The board expects to look at the estimated dividend range at the time it announces its Interim Result.

More like this

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

Editorial: A new era for two co-ops

OPINION: Farmer shareholders of two of New Zealand's largest co-operatives have an important decision to make this month and what they decide could change the landscape of the dairy and meat sectors in New Zealand.

Should co-op sell its consumer brands?

OPINION: As CEO of the Dairy Board in the 1980s I was fortunate to work with a team of experienced and capable executives who made most of the brand investments that created the international consumer business Fonterra inherited. Soprole in Chile was the largest, but there were more than 20 countries where consumer marketing companies were established and Anchor and other brands were successfully launched.

Featured

'One more push' to eliminate FE

Beef + Lamb New Zealand (B+LNZ) is calling on farmers from all regions to take part in the final season of the Sheep Poo Study aiming to build a clearer picture of how facial eczema (FE) affects farms across New Zealand.

Winston Peters questions Fonterra divestment plan

Foreign Affairs Minister Winston Peters has joined the debate around the proposed sale of Fonterra’s consumer and related businesses, demanding answers from the co-operative around its milk supply deal with the buyer, Lactalis.

National

Machinery & Products

» Latest Print Issues Online

The Hound

Quid prod quo?

OPINION: Ageing lefty Chris Trotter reckons that the decision to delay recognition of Palestinian statehood is more than just a fit…

Deadwood

OPINION: A mate of yours truly recently met someone at a BBQ who works at a big consulting firm who spent…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter