News and Opinion, sponsored by RaboPlus

Fonterra 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.

(more…)

Fonterra has announced a fresh forecast for its payout for the current 2009/10 season, keeping it at NZ$4.55/kg of milk solids as a 10 cent increase in the profit component to 55 cents compensated for a 10 cent fall in the commodity milk price to NZ$4.00.

However Fonterra lowered its forecast for milk production because of bad weather and cash-strapped farmers skimping on feed and fertiliser. This will put an extra squeeze on regional New Zealand and overall GDP.

Here is the full Fonterra statement below.

(more…)

Dairy giant Fonterra announced it would lend up to NZ$15 million to its 50% owned subsidiary, rural retailer RD1 Limited, so that RD1 can extend interest-free terms for farmers for “essential dairy supplies.”

The Fonterra loan to RD1, which is interest bearing and due to be fully repaid by April 30 next year, will be to assist farmers under financial pressure due to the current lower payout environment, Fonterra Director of Milk Supply Barry Harris said.

“It’s a tough time for our farmers and we have been looking at every avenue we can to help them, particularly in finding ways to cut costs and manage cash flows while continuing to keep their farms productive,” Harris said.

“This opens up another option and some flexibility for farmers needing essential supplies to keep their farms running in what is going to be a difficult season for many,” he said.

(more…)

Fonterra today lifted its payout forecast for the 2008/09 season by 10 cents to NZ$5.20 in an unscheduled announcement. The increase in the payout forecast will mean farmers will get an extra 10 cents per kilogram of milk solids (kgMS) in their advance payments from June, up to NZ$4.15/kgMS, Fonterra said.

The advance payments are monthly payments from Fonterra to farmers throughout the year and are made up to the final payout at the end of October. The monthly advance rate rises progressively through the season.

At the revised payout forecast of NZ$5.20, advance payments would rise to NZ$4.75 by October, plus a 45 cent value return component made in the final payout. The remainder of the payout figure is paid retrospectively for each month, based on farmers’ milk solids production.

Fonterra chairman Henry van der Hayden said that the Fonterra board was conscious of farmers’ cash flows and wanted to make the announcement as soon as possible.

(more…)

Fonterra announced its payout forecast would remain at NZ$5.10 per kilogram of milk solids after a “solid half year financial result” for the six months to the end of January. However, debt at the end of January was up from July, partly due to NZ$700 million in extra payments to farmers above the normal payment schedule, Fonterra said. (Update 3 to include half year result.)

“Despite this climate, our payout is still forecast to be NZ$5.10, and our result shows Fonterra to be in reasonable shape given the turmoil in the world economy – it’s a tough time for everyone and Fonterra is no exception,” Fonterra Chairman Henry van der Heyden said.

“We have taken, and will continue to take, the tough decisions to manage the business prudently in the current climate and get our farmers the highest payout,” he said.

Fonterra said its debt gearing had risen to 61.5% at the end of January compared to 57.4% at the end of July. It said the increase was primarily due to:

(more…)

Fonterra CEO Andrew Ferrier said that the dairy giant was planning a NZ$300 million bond issue with unlimited oversubscriptions to be marketed in early February.

Ferrier was speaking on Fonterra’s sky digital channel used to broadcast the announcement that Fonterra had revised its payout forecast for this season down to NZ$5.10/kg from its forecast of NZ$6.00 last year and last season’s payout of NZ$7.66.

There had been talk since before Christmas that Fonterra would announce the bond issue to refinance some financial market borrowings and to reduce its debt levels.

(more…)