Ag 11 december, 2014

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District faces massive dairy loss Milk powder at Fonterra’s Darfield plant awaits export. Fonterra has slashed its milk payout to $4.70 kg/MS.

BY GUARDIAN REPORTERS The Mid Canterbury economy and dairy farmers are braced for a milksolids payout that may be well in excess of $400 million less than it was last year. Reacting to falling global dairy prices, Fonterra yesterday knocked 60 cents off the $5.30 per kilogram of milksolids payout it had forecast in September. It followed a record $8.40kg/ MS payout for the 2013-14 season, which was worth about $1.039 billion to Mid Canterbury that season. Combined with a previouslyannounced estimated dividend

of 25-35 cents per share, the total cash payout for 2014/15 was forecast at $4.95 to $5.05kg/ MS. Grow Mid Canterbury chief executive Rob Brawley said many Mid Canterbury farmers were braced for the drop but the price would be a massive hit to the local economy. Farmers would address costs where they could, and that would naturally flow through to the businesses that service them and the wider economy, he said. That said, the drop had to be seen in context: the sector had enjoyed a couple of very good years.

Federated Farmers Mid Canterbury president Willy Leferink said the drop was widely expected and that progressive farmers had prepared to “ride out the storm”. Proactive bank managers were working alongside their clients to address budgets ready for when the cushion of the final, previous payout dwindled, he said. Even so, Mid Canterbury’s 300-or-so dairy suppliers faced a season where spending was kept in check and hopes were high for a better, following season. Ashburton District mayor

Angus McKay said the drop was, “short term . . . not good for the district”. The council was trimming budgets in anticipation of the new, tight year. Nationally the drop will result in a $6.1b loss relative to last season to the dairy industry, equating to 2.7 per cent of gross domestic product. When the estimated dividend range of 25-35 cents per share is added to the $4.70kg/MS announced yesterday, farmer shareholders can expect a payout of $4.95-$5.05kg/MS. Some commentators had anticipated Fonterra would revise

its dividend forecast upward, however yesterday the co-op said that will not happen until interim results are announced next year. In a statement issued yesterday Fonterra chairman John Wilson said there was still considerable volatility in global dairy markets, reflecting falling oil prices and geopolitical uncertainty in Russia and the Ukraine. Weak demand from China, and increased production in the US has also hurt milk prices.

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