Tuesday, 04 October 2016 09:55

Farmers get the lot

Written by  Sudesh Kissun
Fonterra chairman John Wilson (pictured) says all of the 50c increase has been passed to farmers as an advance. Fonterra chairman John Wilson (pictured) says all of the 50c increase has been passed to farmers as an advance.

Fonterra has for the first time passed all its forecast milk price rise to its cash-strapped farmer suppliers.

The co-op last month announced a 50c increase in its 2016-17 farmgate milk price, lifting it to $5.25/kgMS. Normally farmers get an advance payment – about 70% of the forecast price – then a final payment after the end of the season.

But Fonterra chairman John Wilson says all of the 50c increase has been passed to farmers as an advance.

“This has been done for the first time; it reflects our co-op’s strong balance sheet and acknowledgment of the tough times our farmers are facing out there,” he told Rural News.

Last week, Fonterra directors, including Wilson, held about 45 shareholder meetings to discuss the annual results.

He says farmers appreciate Fonterra’s net profit jumping 65% to $834 million, “but we realise things are difficult on farms right now…. Fonterra has responded by building a stronger balance sheet and getting cash to farmers quicker than we normally do.”

Earlier this year, Fonterra lifted the advance rate and brought forward its dividend payment. Wilson says it’s pleasing to hear farmers appreciate the work the co-op is doing; more needs to be done, he adds.

He says Fonterra’s rural service subsidiary Farm Source is also helping farmers, using scale to buy goods cheaper and passing those savings to farmers. Under Farm Source’s rewards programme, farmers accumulate ‘eligible spend dollars’ -- helpful for sharemilkers and young farmers. It also offers extended credit on farm purchases.

Wilson says Fonterra has been focusing on its balance sheet for three years, working hard to return every possible cent of value back to farmers.

“Our business strategy is serving us well. We are moving more milk into higher-returning consumer and foodservice products while securing sustainable ingredients margins over the GlobalDairyTrade benchmarks, especially in specialty ingredients and service offerings.

“Increased earnings and continuing financial discipline have increased the return on capital and strengthened our balance sheet by significantly reducing debt.”

Fonterra’s milk supply over the past five years has grown at an average of 5% annually and the co-op has built more plant to process the extra milk. More efficient processing has shaved costs by 8%.

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.

Featured

 

Judge named for on-farm comp

Waikato contract milker Corey Ferguson has been named as the judge for the New Zealand Agricultural Show’s on-farm competition in November.

» The RNG Weather Report

» Latest Print Issues Online

The Hound

Spell check

Your old mutt was not surprised to see the NZ Dairy Industry Awards hastily remove the title of this year’s…

About time!

Your canine crusader has been a long-time critic of NZ governments – of all stripes – who, for the past…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter