Tuesday, 11 December 2012 08:56

Feds welcome Fonterra revision

Written by 

Fonterra's dairy farmer supplier-shareholders are welcoming an early Christmas gift, with the cooperative lifting its 2012/13 forecast payout by 25 cents per kilogram of milk solids (kg/MS).

"This will be a huge relief putting clearer air between our costs and projected revenue," says Willy Leferink, Federated Farmers Dairy chairperson.

"I must confess we were expecting this revision and I imagine the markets were as well. It was probably a case of getting the Fonterra Shareholders Fund away first.

"As Fonterra noted, GlobalDairyTrade prices have increased by an average of 17.7% since August. Over recent times farmers had seen more gains than falls on the platform too."

But before people end up confusing revenue with profit, Leferink says the Ministry for Primary Industries National Dairy model had forecast a cash deficit of $19,000 inside the farm gate this season.

"Fonterra's revision upwards looks like turning that from red to a modest black. The cash surplus is more likely to be around $21,000 if the current forecast sticks," he says.

Farm working expenses and interest payments now represent $4.99 kg/MS, he says. On the old milk price of $5.25 kg/MS that didn't leave much freeboard, if any.

"The latest milk price revision of $5.50 kg/MS is also a long way short of the $6.08 kg/MS farmers were paid for their milk last season," Leferink says.

"Federated Farmers advice is to maintain austere budgets and prioritise spending that saves your farm business money, like your Federated Farmers membership. There could be economic shocks to come like what is brewing in the United States with its 'fiscal cliff'.

"We also need to be mindful that without wide scale water storage, the Kiwi economy is acutely vulnerable to the vagaries of rainfall in some of our key farming areas. There are pockets of dry now appearing too.

"Having seen one headline wax-on about a six-figure payout, I must again caution not to confuse revenue with profit. This expected revision is welcome and is great for morale before Christmas but it will not set the tills alight," Leferink says.

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