Fonterra prudent on milk payout
A farming leader has welcomed Fonterra’s decision to retain its forecast milk payout at $6 per kilogram of milksolids.
Federated Farmers Dairy chairman Andrew Hoggard said the unchanged forecast was good news, as prices had fallen by 3.2 per cent this week at the Globaldairytrade auction.
‘‘I would rather they were prudent and conservative in terms of sending signals to farmers rather than getting all excited and raising the price up before it’s justified and then ... dropping things back down again.’’
Hoggard said there had been speculation that Fonterra could lift its forecast after South Island rival Synlait raised its payout to $6.25/kg in early February.
‘‘If things stay on an even keel, they may be able to lift things towards the end [of the season].’’
The total payout available to farmers for this season is forecast to be $6.50-$6.60/kg when combined with the forecasted earnings per share range for this financial year of 50-60c/kg.
Fonterra also increased the monthly advance rate it pays to farmers, lifting it 37 cents to $4.85/kg during February, to be paid in March.
This meant more money in farmers’ pockets earlier, Hoggard said. Topping the advance rate will also give farmers more capacity to pay off debt incurred over the past two years when the payout dropped.
‘‘It was always going to take time to get back in the black quicker, so by advancing that [cash] will help move people forward a lot faster,’’ he said.
Although dairy farmers faced an improved outlook, financially many were still carefully watching their spending.
‘‘This will help get everything back onto an even keel quicker.’’
Fonterra chairman John Wilson said the co-operative was confident that the forecast was at the right level, following the 75c rise in milk price in November last year.
‘‘The global outlook for dairy remains positive. Since November, the global market for commodity dairy products has remained relatively balanced and we expect global prices to continue to hold or gradually increase over the back half of this season – a view shared by most global analysts,’’ he said.
‘‘Our confidence in the global dairy market at this stage of the season, combined with the strength of our co-operative, has enabled us to increase the monthly advance rates more than we normally would at this time of the year.’’
"The global outlook for dairy remains positive." John Wilson, Fonterra chairman