Fonterra has raised the price it plans to pay its supplier farmers for their milk, by +50c per kgMS.
Their latest indication for the current 2021/2022 season is now a range of $8.90 to $9.50/kgMS, up from $8.40-$$9.00.
The mid-point is now $9.20/kg and at that level it will be paying out New Zealand suppliers $13.8 bln.
CEO Miles Hurrell said: “In general, demand globally remains strong – although, we are seeing this vary across our geographic spread. Overall, global milk supply growth is forecast to track below average levels, with European milk production growth down on last year and US milk growth slowing due to high feed costs.
“It’s a similar supply picture in New Zealand. Earlier this month we reduced our forecast milk collections for 2021/22 from 1,525 million kgMS to 1,500 million kgMS due to varied weather and challenging growing conditions.
Fonterra last lifted its forecast milk payout on December 3, 2021. This latest increase will add $600 mln from that level. Fonterra ended the previous season with a milk payout at $7.54/kgMS, so today's revision puts it 22% higher than that.
In fact, at $9.20/kgMS, this is a record high, besting the previous high in 2013/14 at $8.40/kgMS. You can track the payout history here for all dairy companies, including Fonterra.
At this new price indication, it is above all estimates by the main dairy analysts - which is very unusual. Normally Fonterra is more conservative than most analysts, especially on the way up.
In addition, Fonterra pays a dividend, which in the 2020/21 season was 20c/share. High milk prices limit their earnings. They now say: “While the higher forecast Farmgate Milk Price does put pressure on our margins in our consumer and foodservice businesses, prices in our ingredients business are favourable for milk price and earnings at this stage. As a result, we remain comfortable with our current 2021/22 earnings guidance of 25-35 cents per share.” Earnings at that level should enable the Company to maintain its 20c dividend.
51 Comments
I posted a while back on the need to cut GST from essential foods but gong by the responses I got apparently its in the to hard basket, ie what is an essential food, if a peanut has salt on it is it now "processed", is fruit in a can "essential" etc etc etc! I don't think its that difficult but we seem to always find a way to complicate the most simple of concepts.
Certainly there should be no GST on food.
This government says they are pro family and for the poor people but they want to take money from even what people want to eat. I could feed my family a lot more healthy if I can save that 15% on my food bill.
PM is a lady but i bet she never cooked a meal for herself and family from wholesome ingredients bought from a supermarket.
High food prices is not just a NZ thing. See this.
In fact, global dairy prices went up +17% in the year to December, but New Zealand retail dairy prices went up only 4.2% - (apart from yoghurt which rose +20%). Kiwis got off lightly, it seems
Urgh, almond milk, get her to have a read of this article, she might change her mind on how bad dairy is.
https://www.theguardian.com/environment/2020/jan/07/honeybees-deaths-al…
A recent survey of commercial beekeepers showed that 50 billion bees – more than seven times the world’s human population – were wiped out in a few months during winter 2018-19. This is more than one-third of commercial US bee colonies, the highest number since the annual survey started in the mid-2000s.
Beekeepers attributed the high mortality rate to pesticide exposure, diseases from parasites and habitat loss. However, environmentalists and organic beekeepers maintain that the real culprit is something more systemic: America’s reliance on industrial agriculture methods, especially those used by the almond industry, which demands a large-scale mechanization of one of nature’s most delicate natural processes.
I've been making my own coconut yoghurt for a little while now - very easy and much cheaper, takes about 5 minutes a week to warm up a couple of tins of coconut cream to body temperature, add a couple of spoons of the last batch (or shop bought to get started), then stick it in a thermos for a day or two.
$3-4 for 800ml and tastes good - may be a little thinner than the shop bought as they add thickeners, but after it's been in the fridge a couple of hours it gets thick enough for me.
Govt guidelines for alternatives for children https://www.nutritionandactivity.govt.nz/sites/default/files/1.3%20261%…
Not everywhere though - https://www.theguardian.com/business/2021/sep/17/britons-drink-plant-ba…
Switched to plant based milks a few years ago and never looked back.
VTHO, you're welcome to your little dream world! The production of monoculture almond " juice" is one of the least sustainable food supplies going. Growers use vast amounts of water on massive plantations and use imported bees to pollinate. One of the major causes of bee colony collapse! Growing almonds is every bit as bad as as palm oil plantations! As for oat juice, way more kg of Nitrogen per ha is used to grow a good crop of oats than is used per ha in pastoral dairy farming! Then there is all the diesel burned to prepare the ground, plant, fertilize, harvest, transport and process to produce the juice! Very sustainable!
Lol mate your post is one large assumption. Read what I said. I never said one thing about sustainability. It is actually for health reasons if you must know. The higher price assists in the decision. You can calm down now. Btw my little dream world is quite nice - one not based on incorrect assumptions.
Mate! Not! What exactly was I assuming? I was pointing out that it is a destructive unsustainable form of food production. People such as yourself who buy the product are perpetuating that! You are free to do as you like. But your oat and almond juice is far more expensive than real milk and most of what you pay goes into the pocket of offshore companies. Do some basic research!
You were assuming my little dream world was one where I drink almond milk over cow milk because I care about sustainability. I never mentioned sustainability but you somehow turned your whole comment into a rant about it, assuming I wasn't aware. Like I said, predominately health reasons. Well aware of how it is produced because I did some research before hand. Another assumption by yourself that I did no basic research lol, you're on a roll, keep going..
Thoughts on the below? (I.e. vs the point typically made re Oats requiring the least water)
Monculture dairy farming is in most cases better for the soil than monoculture oat growing, simply because most dairy farms grow perennial grass, clover or alfalfa. But none of them are sustainable in any wider sense and consumers are not making a good ethical or environmental choice by buying any of them.
https://www.resilience.org/stories/2021-01-19/oats-or-milk-is-not-the-q…
Go for local foods produced in organic, regenerative ways, preferably by a farmer or a community you know
Both the above and this seem to suggest a mixture of crops (in existing horticulture) and/or livestock...where are we heading in NZ in such regard?
Oddly enough, press coverage in NZ said "Boring Oat Milk founder Morgan Maw says oat milk uses 13 times less water than dairy and produces (?) six times less fertiliser." https://www.1news.co.nz/2021/10/25/oats-based-product-joins-list-of-mil…
I produce over 17k L per hectare good luck getting that out of oats lol. There are dairy farms in NZ been around over 100 years, if it was unsustainable - surely their yields would be declining by now, they are not, yields are up triple or more. You have to have a time horizon of 1000s of years and discount all scientific progress to seriously think it's unsustainable. Unless of course 'unsustainable' actually means - something you don't like.
Re sustainability, clearly it seems to include emissions, use of water (effect on local aquifers / ground water), pollution of waterways etc. 100 years ago waterways in those areas were far more swimmable too and various methane and CO2 emissions had not contributed to climate change to the degree they now have.
Not a made up term solely driven by nefarious opponents, as far as I can see, which seems to be what the comment above wishes to be so.
Milk alternatives suppliers are lagging well-behind their dairy counterparts to provide a wholesale discount to commercial operators. The industry is struggling to meet retail demand due to lack of productive capacity in NZ.
E.g., our locally-grown oats have to travel 18,000 km to Sweden in order to be milked.
I do. I could never get behind the plant based milks as they taste disgusting to me. The only one I can drink is hazelnut milk and that is when I make it myself. I don't drink milk I just add it to drinks/recipes, so 2L lasts a week just added to cereal and recipes.
And I don't think they are cheaper? It's more like $6 per 2 litre on a good day compared to $4.80 for 2L milk.
Fair enough. Almond milk is a bit bland for sure. Oat milk is much creamier and better for coffees if that's your thing. Still can't beat blue or silver top cow milk for taste in my opinion. You're correct, oat and almond are not cheaper, just as dairy gets more expensive it is easier to justify not buying it.
Great news for the tradeable sector. Farmgate prices have multiplier effects throughout the economy, ranging from the obvious (vets, feed, fert, fences) to the subtle (robotics, drones, machine learning, systems integrators etc). None of these multipliers are captured in statistics, as Keith Woodford has pointed out: most ag inputs are treated as being in other sectors entirely.....
A thankless stressful job imo.
Anyone that moans that cockies make too much money should take in the mega debt most of them have, work 300 odd days straight before taking a break and then play to the whims of the weather to feed the animals.
Not a job I'd like to do.
I predicted $9.50 for this season and we are getting close. I based this on the fact that fonterra is always about $1.50 out with their initial forecast and I guessed it would be higher. 10% down on last season and costs are through the roof. I'll be happy if I make the same as last season.
From the update "our path to 2030"
Fonterra will return around $1 billion of capital by FY24.
And assuming they achieve targets and maintain a positive outlook, there will be further capital returns to occur from FY25.
Also by 2030 Fonterra are targeting a dividend of around 40-45 cents per share. More than double the 20 cents last FY
Maybe true Jack-but it sucks that those supplier shareholders who had to share up pre capital structure paid around $5 a share,with minimal dividend return on compulsory share purchase.I think the so called promise windfall of selling assets of a $1 billion (approx .60 cent return on every share held) is to retain supply & is really only getting back what we lost from poor Chinese Investments- ( Beingmate in particular)Regards
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