increase font size
FONTERRA IS maintaining its forecast farmgate milk price at $8.30kg/MS for the 2013/14 season.
This is 70c/kgMS below the theoretical farmgate milk price of $9/kgMS calculated in accordance with the milk price manual. Fonterra is using the discretion it has to do this under abnormal circumstances, which in this case is the big gap in price between whole milk powder and other products.
Chief executive Theo Spierings says "doing nothing, and forecasting a farmgate milk price that is higher than we can afford to pay at this stage in the season, is not an option".
The estimated full year dividend has dropped by 20c to 10 cents per share - delivering a forecast cash payout of $8.40.
The board has also approved an increase in the advance rate with the December payment, paid in January 2014, increased by 30c to $5.80.
Fonterra's forecast EBIT (earnings before interest and tax) for the financial year ending July 31, 2014 is $500-$600 million.
Chairman John Wilson says milk powders are continuing to sell at very high prices because of the strong global demand and limited supply.
"Only four months into the season, we are in an extraordinary situation. The gap between prices for milk powders compared to cheese and casein is greater than it has ever been before," he says.
"The high powder prices are good for our farmer shareholders, and good for New Zealand.
"The forecast farmgate milk price, which is calculated under the milk price manual, is based on processing and manufacturing milk powders. The calculation is also based on the costs involved in production for an efficient manufacturer of Fonterra's size and scale.
"However, Fonterra's actual asset base includes a number of cheese and casein manufacturing plants which means that we are not able to maximise profits from these plants in the current environment.
"In such abnormal circumstances, the board has the discretion to pay a lower farmgate milk price than that specified under the manual, if it is in the best interests of the cooperative.
"Today's forecast is our best estimate, but given the current volatility it may change over the course of the season. As a result of this volatility, the board has also lowered the dividend forecast for the 2014 financial year to 10 cents per share," says Wilson.
Spierings says Fonterra will maintain our financial discipline and not pay the milk price out of borrowings – particularly in a year when we are forecasting a record payout for our farmers.
Fonterra is required to consider its farmgate milk price every quarter as a condition of the Dairy Industry Restructuring Act (DIRA).
Buoyed by strong forecasts for milk prices and a renewed demand for dairy assets, the South Island rural real estate market has begun the year with positive momentum, according to Colliers.
Fonterra says it takes the ongoing threat of 'adverse cyber action' extremely seriously.
Despite the turmoil in global markets, Fonterra is continuing with a dual track process to divest its multi-billion dollars consumer businesses.
Fonterra says the US continues to be an important market for New Zealand dairy and the co-op.
Fonterra has named Elizabeth (Liz) Coutts the chair of Mainland Group, the proposed divestment entity of the co-operative’s consumer business.
Among the regular exhibitors at last month’s South Island Agricultural Field Days, the one that arguably takes the most intensive preparation every time is the PGG Wrightson Seeds site.
Two high producing Canterbury dairy farmers are moving to blended stockfeed supplements fed in-shed for a number of reasons, not the least of which is to boost protein levels, which they can’t achieve through pasture under the region’s nitrogen limit of 190kg/ha.
Buoyed by strong forecasts for milk prices and a renewed demand for dairy assets, the South Island rural real estate market has begun the year with positive momentum, according to Colliers.
The six young cattle breeders participating in the inaugural Holstein Friesian NZ young breeder development programme have completed their first event of the year.
New Zealand feed producers are being encouraged to boost staff training to maintain efficiency and product quality.
OPINION: The world is bracing for a trade war between the two biggest economies.
OPINION: In the same way that even a stopped clock is right twice a day, economists sometimes get it right.
OPINION: The proposed RMA reforms took a while to drop but were well signaled after the election.
