Positive cashflow for dairy farmers 'unlikely' until 2018: ANZ
ANZ Bank New Zealand, the country's bigger lender, has warned dairy farmers are unlikely to see positive cashflow for another 18 months.
In analysis published shortly after Fonterra Cooperative Group confirmed its milk price forecast of $4.25 per kilogram of milk solids, ANZ's agri-economist Con Williams said most farmers had budgeted at around $4.30/kgMS and "most continue to show a cash loss of 50-70c/kgMS at these figures despite a number of cost reductions and farm management changes." Positive cashflow is not expected until early 2018.
ANZ expects the price to be in the "mid to high-$4/kgMS" for the 2016/17 season but added that international prices would need to break outside the current range to achieve this.
The Fonterra payout to farmers peaked at $8.40/kgMS in the 2013/14 season, which if ANZ's forecast is correct, would mean a downturn that has lasted for around four years.
The planned increased dividend to farmers by Fonterra of 50-60c/kgMS is described by ANZ as signalling underlying improvement from higher margins, efficiency gains, improvements in Australia and the scaling back of capital expenditure.