Fonterra raises its milk payout price

Rural News / news

Strong dairy prices sees dairy giant Fonterra raise its forecast 2021/22 milk price payout by 30 cents, but trim its earnings forecast

3rd Dec 21, 9:38am by David Chaston

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.

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18 Comments

by redcows1 | 3rd Dec 21, 10:04am 1638479064

Long time critic.

I'm impressed, Fonterra pre Hurrel would not be even close to this, especially the dividend.

Real pressure on other processors

by Westminster | 3rd Dec 21, 10:09am 1638479398

Full Credit to Miles on earnings, but the milk price is just a reflection what the market prepared to pay

by linklater01 | 3rd Dec 21, 4:30pm 1638502220

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?

by HW2 | 3rd Dec 21, 12:01pm 1638486080

Everyone at the local farmsource store had big smiles, makes sense

by napierboy | 3rd Dec 21, 12:42pm 1638488531

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?

by AP71 | 3rd Dec 21, 12:58pm 1638489536

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?

by Dick Mortensen | 4th Dec 21, 11:55am 1638572103

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.

by linklater01 | 3rd Dec 21, 4:37pm 1638502670

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.

by NoVictim | 3rd Dec 21, 6:50pm 1638510614

Yeah but the farmers haven’t found it that difficult

I think you will find it is they that deserve the thanks for keeping the place in coin!

by Dick Mortensen | 4th Dec 21, 11:57am 1638572256

Correct and enabled a bunch of Jafa's to live above their means.

by Westminster | 4th Dec 21, 1:43pm 1638578633

It classic human behaviour where critics of Ag expect their to be no GHG emission, pristine environment, high wage economy, AND expect to rock up to super market to buy cheap food as they chose not too produce their own.

by DD62 | 6th Dec 21, 8:04am 1638731082

exactly how are you "supporting" farmers day in day out? Grow up napier"boy"!

by Brave one | 11th Dec 21, 10:37am 1639172259

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)

by waymad | 6th Dec 21, 11:54am 1638744894

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.

by redcows1 | 6th Dec 21, 5:33pm 1638765222

Darfield?

by waymad | 7th Dec 21, 7:20pm 1638858030

Possibly some, not most, but depends on the product mix.

And the Darfield plant is on a rail line too, so my choo-choo comment stands. It's just opposite The Oaks homestead which we leased for a few years in the 80's. Which house is now owned by Fonterra.

by solardb | 7th Dec 21, 10:53am 1638827624

Its a great photo . I'm a railnut, but confused this with the Rakaia gorge bridge , until now.

the English settlers had grand plans for a inland north -south route, presuming population density would be similar to England in the future.

by waymad | 7th Dec 21, 7:26pm 1638858384

The Rakaia is spanned by two bridges, one an unusual Bollman truss design or a derivative of it.

The rail line was surveyed and land set aside; the transects were on plans held in Malvern County archives.