Open Country Dairy cuts milk payout below Fonterra's forecast

Open Country Dairy chairman Laurie Margrain said the revision reflected the company's view on the market at present.

Open Country Dairy, New Zealand's second-largest dairy processor, has reduced its milk payout by 30c  to an average price of between $4.00-4.30 per kilogram of milk solids.

Chairman Laurie Margrain told BusinessDesk the revision reflected the company's view on the market at present, and that suppliers were notified last week. In September, Fonterra lifted its forecast total payout for the 2015/16 season by 75c  to $4.60/kgMS, and affirmed that view in December.

ANZ Bank New Zealand expects Fonterra [NZX: FCG] to reduce its 2015/16 milk price forecast and thinks it will come in at the bottom end of a price range of $4.25-4.50/kgMS. In an economic note to clients, ANZ said the move by Open Country highlighted the direction of risk in the industry. It expects Fonterra's price to be close to $4/kgMS by the end of 2016.

Open Country's revision comes ahead of a GlobalDairyTrade auction on Tuesday in the US, which is expected to show a small decline, as indicated by weaker whole milk powder and skim milk powder prices on the NZX futures market, according to OMF dealer Michael Peters.


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