Dairy giant Fonterra has raised its 2021/2022 forecast farmgate milk price range to between $8.40 and $9.00/kgMS, and a mid-point of $8.70/kgMS.
This is a rise from their previous mid-point of $8.40, so +30c.
The bottom of their range has risen +50c while the top of their range has risen +10c.
At the same time, they have lowered their earnings guidance marginally to 25c to 35c per share from 25c to 40c per share.
Paying more to shareholder-farmers for milk undermines profitability, the essential and long-unresolved tension the cooperative faces.
Fonterra also reported that milk volumes are -3% lower compared with this time a season ago, and they expect to collect 1.525 bln kgMS this year, down from 1.539 blb kg/MS last season
This update also confirms they are working on divesting their struggling Chilean operations, and the have an "ownership review of our Australian business, with the appointment of advisors".
"Dependent on the outcome of these processes, we intend to return around $1 billion of capital to our shareholders and unit holders by full-yera 2024," Fonterra said.
The dairy cooperative also noted: “We’re also working to find a solution to the challenge of on-farm emissions and one of the exciting projects we’ve been working on is Kowbucha, a probiotic which could switch off the bugs that create methane in cows. Initial results have been promising, showing a reduction of up to 50% in methane, and we’re now at the stage of trialling it on farm."
You can find the history of all dairy company milk payout levels here, including for Fonterra.
You can also find the current forecasts for the the 2021/2022 season payouts by the main dairy analysts here, as well as the emerging forecasts for the 2022/23 season.
18 Comments
redcows,
As a complete outsider, I watched the many mistakes made with a sort of horrified fascination. I know little about farming, but something about business and some of them looked pretty obvious.
I too am pleased both for farmers and the wider economy. There appears to be some evidence that it is possible to get more milk from fewer cows. How far could that be taken do you think?
Looking forward to farmers thanking all New Zealanders for supporting the rural sector through this difficult economic time by immediately halving the price of milk in our supermarkets. Kiwis sacrifice the natural beauty of our country's rivers and land by supporting the primary sector day in day out and deserve to be thanked. I assume Groundswell will fold now?
Groundswell issues have nothing to do with current primary produce prices which are at a very specific point of time. They could be rubbish in 6 months time. The issues groundswell are raising are longer term. They are about meaningful engagement by the government with all New Zealanders when creating policy. This would help to get buy in from the electorate and avoid some ridiculous one dimensional laws being passed that neither work when being implemented or have had any basic analysis done on what unintended outcomes they may also create. Oh and by the way, do you expect all the tradespeople who are benefitting from demand on their services or any other business doing well for that matter to suddenly halve their rates to subsidise the consumer?
We export over 95% of our milk produced, so we get to pay export prices. If we don't pay that, the dairy industry would export 100%! In the 1970's milk was 4 cents a pint (Government subsidized), with lots of cream on the top, in a bottle. Today it is a plastic jug filled with milk not near as nutritious. That is the cost NZ consumers pay for the exporting dairy industry, on top of the environmental concerns. Groundswells concerns will fall on the same deaf ears as the unvaccinated complaining about governments one dimensional laws that will neither work when implemented. It creates a division, criminals, and needless mandates. Groundswell beware; government now have the ability to lockup peaceful protesters, shut down roads, trace your movements and with the new mandates coming, burn your buildings and eliminate your herd if you do not comply. By the way, tradespeople have competition, unlike the dairy industry.
napierboy,
Interesting idea and I have no doubt it would get support from many consumers. However, surely we should take this further. All the tradies I know are working flat out, so would presumably be happy to immediately cut their prices in half. The building industry accounts for a great deal of waste going to landfills.
There are many very successful wineries in the Napier area. You might wish to approach them with your idea and their reaction would be interesting to observe.
PS. I am not a farmer, so would love to get cheaper milk.
A famous overseas comedian tells a good story about your expectations of others:
The comedian was asked to do a comedy night for free and the proceeds of the tickets sold would go to a charity. He said he was happy to give his time and the time of his crew, which equates to 2% of his annual income ( ie; he did 50 shows a year and would do one for free = 2%). He then expected everyone that attended the evening would pay 2% of their annual income for a ticket (ie 100k income = $2000 for a ticket). As you expected, the event didn’t go ahead.
This is what you are asking of farmers; and I am sure farmers are happy to give some of their income up if everyone does the same. I am keen to pay less for anything that uses our beautiful New Zealand resources to run a business ( which is basically every single business in New Zealand)
The photo is of the Waimak Gorge Bridge, built to carry the Oxford-Sheffield rail line, which lasted for a very few decades. The rail, clearly not the bridge...
And as an example of current nuttiness, all Fonterra milk from Blenheim south is carted to Clandeboye, just a few clicks north of Timaru. Dairy factories at Kaikoura and Christchurch are long since gone...
There's a rail line which could take the traffic, just as in the Naki there's a milk train feeding the Whareroa plant.
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