Fonterra payout likely to start low
Most analysts are picking Fonterra will announce a cautious opening payout forecast for the 2017-18 season of about $6 per kilogram of milksolids after its board meeting on Wednesday.
The exact timing of the announcement is uncertain but it is likely to be Thursday. Fonterra said it could not divulge the date because of NZ Stock Exchange rules.
Federated Farmers dairy group chairman Andrew Hoggard said Open Country Dairy’s opening forecast of $6.25-$6.55/kg MS might influence decision making.
‘‘My gut feeling is that they will be close to OCD. There’s a bit of competition happening with OCD opening a new plant in the Waikato and OCD announced their forecast much earlier than anyone else,’’ he said.
On the other hand, it was always easier politically to lift prices rather than lower them, which could point to a lower starting bid by Fonterra.
While bank economists are predicting a prudent opener, there is a wide range of end-of-season prices. ASB’S Nathan Penny tips the final price could go up to $6.75.
He said global dairy levels were now in balance after a period of high production which had pushed prices down.
However, the difference in recent years between the opening and final price had been on average ‘‘plus or minus $1.50’’, he said.
BNZ economist Doug Steel said the bank was not putting out an opening number, but believed the end-of-season price would be $6.
‘‘We are sceptical that these present prices will hang around, because there is potential for higher production brought on by higher prices, and that will push prices lower.’’
However, assuming prices remained as they were, the final payout might go as high as $7, Steel said.
On the back of a fifth consecutive rise in world dairy prices at the May 16 Globaldairytrade auction, ANZ and Westpac lifted their final forecast payouts for the 2017-18 season.
ANZ chief economist Cameron Bagrie and Westpac economist Sarah Drought both said a combination of rising dairy prices and a weaker Kiwi dollar had led to their improved forecasts.
Prices at the auction were up by 3.2 per cent, prompting the ANZ to predict a 75c increase on this season’s $6/kg milk price.
Westpac also revised its 2017-18 season-end forecast to $6.50/kg MS.
‘‘While we still expect global prices to ease back this year, the foundations are there for a step-up in the farmgate milk price,’’ Drought said.