Fonterra slashes milk price payout further
Fonterra had not been expected to review the payout until late May.
Jamie Ball talks about the latest milk price announcement on NBR Radio, and on-demand on MyNBR Radio.
See also: Timing of Fonterra milk price review surprises analysts
Fonterra has reduced its forecast farmgate milk price from $4.70 a kg/MS to $4.50 a kg/MS for this season.
Combined with estimated dividend range of 20-30 cents, this amounts to a forecast cash payout of $4.70-4.80 for the current season.
Under the Dairy Industry Restructuring Act 2001, the board had not been expected to review the payout until late May, so the announcement has taken most by surprise. However, it is understood that a milk price review was part of the agenda for a scheduled conference call between Fonterra’s board yesterday afternoon.
In a statement, Fonterra chairman John Wilson says the reduction reflected the continuing and significant volatility in international dairy commodity prices caused by over-supply in the market.
“We have confidence in the long-term fundamentals of international dairy demand. However, the market has not yet rebalanced and GDT prices for products that inform our farmgate milk price have fallen 23% since February.
“This reduction will impact cashflows for our farmers, who will need to continue exercising caution with on-farm budgets.
“Our farmers are already managing tight cashflows. Although this reduction is not the news that anyone wants, it is important we keep our farmers updated given the significant market uncertainty.
“Given the reduced milk price forecast, we are also lowering the advance rate of scheduled monthly payments to our farmers.
“We will continue to keep our farmers updated as the season progresses,” Mr Wilson says.
Chief executive Theo Spierings said geopolitical unrest in places such as Russia, the Middle East and North Africa is impacting global dairy demand.
“Remote as they are, events such as the flow of refugees from Libya to Europe come together with factors like lower oil prices to soften dairy demand,” Mr Spierings says.
Jamie Ball
Thu, 30 Apr 2015
Thu, 30 Apr 2015
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Fonterra slashes milk price payout further
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