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Wednesday, July 30, 2014
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Milk cash cut by $4b Dairy farmers’ season looks set to go from “lite” to “super trim” on the back of a dramatic drop in the milk price. Fonterra yesterday cut its forecast Farmgate Milk Price for the 2014-15 season, from $7 to $6 per kgMS. That will slash $1.6 billion from its earlier forecast. The drop from $8.40 last season will collectively cut dairy incomes by about $4.3 billion, or 1.9 per cent of GDP. The GlobalDairyTrade price has slumped 16 per cent since June 1. Federated Farmers Dairy chair Andrew Hoggard said it was not the death of dairying, but a reflection of near perfect production seasons in Australiasia, North America and Europe. “The revision has turned our season from being ‘lite’ to ‘super trim’,” he said. While farmers were expecting a revision, the size of the drop has surprised. “It means farmers will need to watch costs closely and cut their cloth accordingly. It means getting back on the computer to reforecast farm budgets.” Fonterra also announced an
estimated dividend range of 2025 cents per share - amounting to a Forecast Cash Payout of $6.20-$6.25 for the current season. Chairman John Wilson said the lower forecast Farmgate Milk Price reflected continuing volatility. “We have seen strong production globally, a build-up of inventory in China, and falling demand in some emerging markets in response to high dairy commodity prices. In addition, the New Zealand dollar has remained strong. Our milk collection across New Zealand last season ending 31 May 2014 reached 1,584 million kgMs, 8.3 per cent higher than the previous season. “This drop in the forecast farmgate milk price will have an impact on our farmers’ cash flows. We continue to urge caution with on-farm budgets.” Federated Farmers is recommending farmers talk to their bank manager, farm consultant and accountant. “Given half of what we get paid is spent locally, this will impact the towns but the cities are not immune,” Mr Hoggard said.
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