Post RSS Feed 
Podcast Feed
Fonterra boosts 2009/10 payout forecast by 55 cents to NZ$5.10/kg
September 22nd, 2009Fonterra has lifted its payout forecast for the 2009/10 season by 55 cents to NZ$5.10 per kilogram of milk solids. The milk price component of the payout forecast was increased by 60 cents, although this was partly offset a a 5 cent decrease in the value return component.
“(T)he revised forecast reflects a sustained improvement in commodity returns and a more positive outlook in international dairy markets,” Fonterra Chairman Henry van der Heyden said. “(F)armers will begin to benefit from the higher Payout forecast from next month, with a lift in Fonterra’s Advance Rate schedule of payments to farmer-suppliers,” van der Heyden said.
“We’ve had really tight cash flows on farms going into this season, and some serious belt tightening to get through. This will give our farmers a bit of relief and some extra flexibility to get the best out of their farms this year,” he said.
Fonterra CEO Andrew Ferrier said the strong increases in prices for whole milk powder (WMP) at the globalDairyTrade events in the past two months echoed a broad strengthening of demand and robust recovery in international dairy prices.
“What we’re seeing in the international market is the firming of a trend, with a more positive sentiment and stronger demand, producing better pricing across the board. Whole milk powder prices have been leading the way, with the prices for other dairy commodities now all moving in the right direction,” Ferrier said.
“While this is good news for our farmers in New Zealand, we remain in a period of extreme price volatility, which makes forecasting challenging, to say the least,” he said.
Ferrier said the 60 cent increase in the Milk Price from July’s forecast reflected higher whole milk powder prices which are included in the commodity milk powder streams within the Milk Price. “The 5 cent fall in the forecast Distributable Profit is due to prices of cheese and casein product streams lagging the range of commodity milk powders [on which Fonterra’s Milk Price is based]. Higher or lower returns on cheese, casein and other streams versus the commodity milk powder streams, go to profit rather than into the Milk Price,” he said.
“(T)he earnings and outlook for Fonterra’s international businesses and joint ventures, including its Australia-New Zealand consumer business, which contribute to the Distributable Profit (Value Return) component of Payout, remain unchanged from the July forecast,” he said.
Van der Heyden said the level of the New Zealand Dollar, which has been trading around 70 cents US, remained a concern but this had been fully factored in to the revised 2009/10 forecast.
Fonterra will announce its financial results for 2008/09 and confirm its payout for the 2008/09 season tomorrow, September 23.
Tags: Andrew Ferrier, Fonterra, Henry van der Heyden, Milk Payout
You may also like to read:
Loading ...
September 22nd, 2009 at 12:15 pm
Goodness, perforce, what dastardly evil must be at work here, I thought from reading these threads the dairy industry was done and dusted.
Seems like it ain’t.
http://www.interest.co.nz/ratesblog/index.php/2009/09/18/fonterra-proposes-new-capital-structure-with-farmers-owning-more-shares/#comment-37651
September 22nd, 2009 at 12:18 pm
So are Fonterra ‘giving’ the farmers some money, so that they can ‘give it back’ to the company in the new capital raising? Just call me cynical, Mark !
September 22nd, 2009 at 12:21 pm
Excellent job , Mark and Harriet , both of you are 100 % on the bull . ……. .ball , sorry .
September 22nd, 2009 at 12:22 pm
Harriet, no. Agri-fax have been predicting an increase based on market prices, despite the NZD. Also, my understanding is the naysayers have been grossly exaggerating the levels of any, if any, stockpiles.
September 22nd, 2009 at 12:32 pm
Well done Mark, I can but dream about being right for longer than 5 minutes. Two doses of good news for the NZ market today forces me to reconsider my opinion that the dollar has peaked.
September 22nd, 2009 at 12:43 pm
Did I miss the bit where Fonterra increased the advance payment of $2.90 per Kg of milk solids?
September 22nd, 2009 at 12:50 pm
Very good news.
September 22nd, 2009 at 1:24 pm
Peter, they have raised the advance to $3.25 to be paid in October. I expected dairy prices to lift but not nearly so soon. The only question I have is how much more volatility is there in the market for both milk commodities and $NZ? I would gladly settle for them staying at current levels for the rest of the season but I think there is still plenty of movement still to go
September 22nd, 2009 at 1:55 pm
lol…..we are all rich and the worlds problems have disappeared…..yay!!!
Might be a good time to buy some GBP for a 12-24month cycle.
September 22nd, 2009 at 2:00 pm
Better do a swap to hedge the interest rate risk there, Paul! Could be an expensive carry with their rates at plumb near zero% and ours looking decidedly perky.
September 22nd, 2009 at 2:09 pm
Mat.
The advance to $3.25 will be important. And like you I think the lift to $5.10 is early – in anticipation of where prices are expected to go rather than where they have been to date. Current NZD dairy commodity prices have lifted a long way, but are still nowhere near those that delivered $5.20 for the 2009 season – even given $5.20 was an underperformance against prices. Current NZD commodity prices are suggesting a little under $5.00 – unless Fonterra has made very good gains somewhere else.
September 22nd, 2009 at 6:28 pm
Interesting times. They are having trouble selling milk in the USA,Canada,South America,Germany/ France and the rest of the EU, the old Eastern block,the UK , Australia and New Zealand but the price is going up. Come on this is Govt interference,central planning may have failed the USSR but by god we are going to do it better.
While farmers in Belgium,Germany and France are pouring their milk on the ground we experience a price increase.Incredulous.
September 22nd, 2009 at 7:37 pm
Dont forget Chile Andrew. Did you not post a report here that fonterra had just dropped their payout in Chile. Meanwhile this lift in payout in NZ helps our dollar attain wings.
September 22nd, 2009 at 7:44 pm
I think I sound pissed off. I am. So Fonterrible begs and borrows another billion (well it tries to) then ups its payout, meanwhile the dollar relaunches upwood, the meat schedule drops, and I get less for my beef and lamb. Bugger.
September 23rd, 2009 at 11:31 am
Farmer Will — the conspiracy theorists could a field day on this.
September 23rd, 2009 at 12:09 pm
Farmer will, that’s interesting.. seems like they are robbing Peter to pay Paul.
Just read this in a Chilean newspaper. I’ll try and translate the first lines ..
Quote: “The worst fears of local dairy farmers about a new low price of fresh milk apparently became reality. The company called Soprole (controlled by NZ’s Fonterra) met with a group of producers to tell them that the payout for a litre of milk would be $20 pesos less”.
They go on to say that a “significant” number of farmers will not be able to keep their farms.
Link here if you can read Spanish..
http://www.australosorno.cl/prontus4_nots/site/artic/20090821/pags/20090821000010.html