Fonterra's 2014-15 payout forecast reduced to $4.70/kgMS from $5.30; NZD falls in immediate reaction

Fonterra's 2014-15 payout forecast reduced to $4.70/kgMS from $5.30; NZD falls in immediate reaction

Content supplied by Fonterra

The following was the supplied statement.

The Fonterra cut follows Open Country dairy's reduction yesterday.

You can track the industry milk payout changes on our summary page here.

Fonterra Co-operative Group Limited today reduced its forecast Farmgate Milk Price for the 2014/15 season from $5.30 per kgMS to $4.70 per kgMS.  When combined with the previously announced estimated dividend range of 25-35 cents per share, this amounts to a forecast Cash Payout of $4.95 – $5.05 for the current season.

Chairman John Wilson said that although farmers were expecting this lower forecast, the revision will put pressure on their farming business budgets.

“There is still considerable volatility in global dairy markets,” said Mr Wilson. 

“Right now we are seeing a number of factors that are delaying a sustained return to higher global prices.”

The global milk supply remains greater than demand, which has resulted in GlobalDairyTrade prices for Whole Milk Powder falling 16.9 per cent since late September, while Skim Milk Powder prices have fallen 7.7 per cent. 

“Falling oil prices, geopolitical uncertainty in Russia and Ukraine, and subdued demand from China as it continues to work through inventory are all contributing to ongoing volatility and weak demand,” Mr Wilson said.

“Today’s revised forecast reflects the Board and management’s best estimates at this time. Given the uncertainty we are advising farmers to continue to be cautious with budgeting and we will update them as the season progresses.”

Chief Executive Theo Spierings said Fonterra was undertaking a targeted programme to generate more cash to support farmers.

“Cash is important for our farmers and for our Co-operative,” Mr Spierings said.  “We will be further strengthening our tight controls on operating expenditure, and will be driving harder on working capital, and deferring capex – provided this does not slow progress on our V3 business strategy.

“This is a clear signal to farmers that we are all in this together.  We are tightening our belts, just as they are.”

The Board expects to look at the estimated dividend range at the time it announces its Interim Result.

Fonterra is required to consider its forecast Farmgate Milk Price every quarter as a condition of the Dairy Industry Restructuring Act (DIRA). 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


Comment Filter

Highlight new comments in the last hr(s).

no use crying over the stuff

The average of $8.4 from last year and $4.7 from this year equals to $6.55.
Still pretty good. The scary thing is that the milk price keeps being low for the next year.
Nonetheless, dairy farmers are mostly very rich. So, why should we care about them having a pay cut for only a year or two?

xingmowang, that is a silly comment to be making.......'most farmers are very rich, sop why should we care'!!!!!
Perhaps you dont understand that Dairy Farmers keep this country going. The quality of like NZers have is very much a result of the dairy industry.
While Farmers are percieved as 'rich', and in most cases on paper they are, they dont have buckets of spare cash to get through long periods of low payouts. Regulatory requirements and technology improvements soon soak up all the cash.
I just think that was an un-necessary, and un fair comment, with little understanding of how this WILL impact ALL New Zealanders