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BusinessDesk: Landcorp sees Fonterra payout reaching high water mark, bullish on sheep

Rural News
BusinessDesk: Landcorp sees Fonterra payout reaching high water mark, bullish on sheep

Landcorp Farming, New Zealand’s biggest farm business, expects Fonterra Cooperative Group’s payout to slip next year and its own earnings from beef exports to fall, reflecting the high kiwi dollar.

The state-owned enterprise is “cautiously optimistic” about 2012, with prices “easing from their highs of the past year” but still underpinned by global demand. It posted a 322% jump in operating profit for the 12 months ended June 30 to $42 million and the 2012 may be “slightly behind” that in the current year, said chief executive Chris Kelly.

“We don’t believe Fonterra can achieve the same payout because of the high kiwi,” he told BusinessDesk.

Beef would be “slightly back” mainly on the strength of the currency against the greenback, which erodes the value of sales into the U.S. ground beef market. Landcorp is “reasonably bullish” on sheep, expecting the same level of income or better, while deer would be at about the same levels as in 2011.

The New Zealand dollar has advanced 27% against the U.S. dollar in the past two years, to reach a post-float high of 87.98 U.S. cents on July 29. The trade-weighed index has gained 14% in that time, peaking at 75.21 on Aug. 1, the highest since mid-2007.

Landcorp has 37 dairy farms and a herd of about 35,000 cows, based on 2010 figures. In the latest year it produced 12,500 tonnes of milk solids.

In May, Fonterra lifted its forecast 2011 pay-out to farmers to a range of $8 to $8.10, before retentions, while flagging a reduced payment for 2012 of $7.15 to $7.25, made up of a milk payment of $6.75 a kilogram and distributable profit of 40 cents to 50 cents.

Fonterra cited the strong New Zealand dollar and moderating commodity prices. The final payout will be confirmed with the cooperative’s earnings this month.
Landcorp’s Kelly said the company is heading into spring “with our animals in as good a conditions as they have ever been” and with an expectation of an increase in the number of lambs.

Storms in August and September last year reduced its lamb numbers by as much as 60,000 but the company got favourable rainfall in January which helped build pasture growth.


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