BusinessDesk: Fonterra reaffirms this season's NZ$7.15 to NZ$7.25 foreacst payout before retentions

BusinessDesk: Fonterra reaffirms this season's NZ$7.15 to NZ$7.25 foreacst payout before retentions

Fonterra has confirmed its forecast payment for the 2011/12 season, which is expected to decline from 2011’s record payout as global commodity prices ease from their highs.

The operating season forecast is NZ$7.15 to NZ$7.25 before retentions, made up of a milk price of NZ$6.75 per kilogram of milk solids and distributable profit of 40 cents to 50 cents.

Today’s statement affirms the forecast range Fonterra gave in May.

The recent decline in food commodity prices “was largely anticipated” when Fonterra first gave its projections, chairman Henry van der Heyden said.

“In volatile economic and market conditions, we could face a range of factors that may affect the season’s milk price. But at this early stage of the season we see no reason to alter the forecast.”

Average prices of dairy products fell for a fifth straight sale at Fonterra’s latest online auction last month. The GDT-TWI Price Index fell 0.9% to US$3,660 a metric tonne, the lowest since December. Milk powder prices have declined 16% from their peak in March, based on the ANZ Commodity Price Index.

Surging dairy prices have underpinned New Zealand’s economic recovery, with government figures yesterday showing they helped push the country’s terms of trade to a 37-year high in the June quarter, prompting some economists to say the index may have peaked.

The previous 2010/11 payout forecast of NZ$8 to NZ$8.10 a kilogram includes NZ$7.50 a kilogram of milk solids and a distributable profit range of 50 cents to 60 cents. The final payment details will be confirmed when Fonterra releases its annual results later this month.

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12 Comments

This is clearly BS. Colin Riden tells us the sky is falling.... surely he couldnt be mistaken?

SS.

There is a reasonable difference between the sky falling and a golden age of agriculture where profits just roll in irrespective of debt and costs. I am certainly not expecting the sky to fall on this production season's payout, but I would wait for Fonterra's first pronouncement after the election for an accurate indication of what it is likely to be.

The Fonterra payout for the 2012-2013 season I expect could be a very different story.

Either way, it is good to see my cautionary views balancing the bullish ones of at least one "golden ager" (of agriculture).

Can you give us an update on how farm debt is tracking now that agriculture is paying down loans (from both the best season in decades and farm sales to offshore buyers)?

There are director elections in which incumbents need to be re-elected to help push through TAF. After the elections the payout will be revised.

I hear Jim van der Poel could be facing serious opposition in the form of Gray Baldwin. Greg Gent is not seeking re-election - he will be missed.  High payout predictions will not influence director elections. We can all follow the international prices and currency trends and make our own minds up on payout.  The govt needs the prediction to to be high at this time.  Farmers that I speak to are taking a much more cautious approach - as is advised by Fonterra.

So the board wouldn't be as cynical as I think, and take elections into consideration when announcing payout. And if international prices and currency trends dictate payout, it's not unreasonable to prepare for a reduction? I have also heard Greg Gent was a well liked and able director.

Gray Baldwin is standing, but what will he bring that Jim doesn't have? I would have thought Russ Rimmington would have been a crdible challenger the last two elections in which he stood. Not according to the CAP panel though, despite a proven business (including international) and civic record, he lacked vital experience according to them. In my opinion the CAP panel is a blatant way of dumbing down Fonterra shareholders, so as to suit incumbunt board members.

 

In the shareholder circles I move in no one takes any notice of the CAP panel results.  Personally I wouldn't vote for Russ Rimmington.  I understand Gray Baldwin has some very big share backed support.  I heard that's how he got elected on the the Ballance board.  If there is a protest vote Jim could be the one to feel the heat.  I have been overseas for quite a while - only recently got back, so am still catching up on things. The electioneering is yet to start so we will see.  I am not a fan of changing directors just for the sake of it. :-)

 

I can't blame you for not wanting to change directors for the sake of it, however in my opinion the CAP , along with votes tied to shareholding are not consistent with successful co-operative principles and values. I get the impression that CAP favors incumbent directors and status quo. 

I respect you not wanting to vote for Russ Rimmington, but I thought his candidate profile read well, but wasn't consistent with his CAP assessment. I don't know him, but our old neighbour from Taranaki spoke highly of the Rimmington brothers, and Russ's brother achieved great things with TSB.

Personally I'm dissapointed with the Fonterra board, I feel we are veering towards a corporate company, which I fear will be the demise of Fonterra and the co-operative dairy industry.

As far as government requiring good payout news; isn't it time we (Fonterra) stood up too the government (within socially acceptable reason).

I agree CAP appears to favour incumbents. In the survey that was done on it (a year ago?) I suggested it get thrown out.

My views on Russ are based on his time as Mayor of Hamilton and candidates meetings.

It should be one vote per supply number. Fonterra confirmed to me last week that shareholder producing 200,000kgms or less are numerically the majority of shareholders.

Did you put a submission in on the Raw Milk Review?

I spoke to the shareholders council deputy chairman about CAP a few weeks ago, and he told me it was an empowering process to be invoved in, as he was last elections. He said CAP comprises high caliber business people, with a broad range of business experience, and that they may be able to identify people that illustrate skills for directorship potential that shareholders may not otherwise pick up on.  He didn't satisfy my misgivings, and I think CAP undermines the power of suppling shareholders and core co-operative principles. It is debateable that members of the CAP are independent, impartial, and beyond influence. I agree when you say directors shouldn't be changed for the sake of change, but I question the openess and agendas of the CAP in relation to the future direction and health of Fonterra as a suppliers co-operative. As an example the shareholders council deputy chair mentioned the business acumen of John Loughlin, who has been on the CAP for so long he would be first name basis with incumbent directors. I don't accept his business acumen and corporate experience is superior to that of supplying shareholders in relation to guidance to who we chose to direct our co-operative. After a brief google search on John, it appears one of his crowning glories was listing Richmond on the NZX, and where's Richmond now?

A farmer down our way wouldn't vote for Russ because of whatever happened while he was Hamilton Mayor, and we're 150kms from Hamilton. But Russ has achieved alot on his own back, which probably can't be said for the sitting board.

I have also been pointed out that the majority of votes are allocated to less than 200,000 kgs. So what is the purpose of tying votes to shareholding? If Gray has a block of votes in the Waikato, does it represent the shareholders with less than 200,000 kgs/ms, or a more specific agenda?

I did send in a submission, and have been long frustrated at the abuse of DIRA by investor owned processors. How does underming Fonterra as a co-operative for the benefit of investor owned corporates with offshore shareholding, benefit NZ? However is the DIRA issue a sideshow to TAF?

We agree on many points.

I believe the underming of Fonterra was initially set up to benefit the ex-pollies and some current pollies involved in the corporates.  How can there be farmgate competition when all except Fonterra can refuse to accept supply?  It's a load of BS.

I have often wondered if DIRA will be a sideshow/compromise to TAF. 

There is NO way in a true democratic country that a private company should be compelled by the govt of the day to supply established competitors with raw product, so that those competitors can then use that raw product, to compete with the supplying company in the export market.  There is not a single precedent of that anywhere in the Western World.

Yes,it will be interesting to see how Gray goes,The big support is based around the Carter holt farms, not everyones idea of farming and future control in NZ I would guess.

The support is not just the Carter Holt farms, giddyup. Though they are a significant part of it.