Dairy farmers pleased at lift in milk price

The lift in Fonterra’s farm gate milk price - from $6.50 to to $6.75 per kilogram of milksolids - is music to dairy farmers’ ears.

Manawatu/rangitikei Federated Farmers dairy chairman Murray Holdaway said it was great news, and unexpected, coming hard on the heels of a previously announced $6.50. ‘‘And especially with the exchange-rate with the US dollar moving in an unfavourable direction of late.’’

He said the dollar was mentioned by Fonterra chairman John Wilson as a fact that farmers should take into account when doing their farm budgets and planning any expenditure.

‘‘And also being this early in the season, there is a lot or water to go under the bridge before this forecast ends up in farmers’ bank accounts,’’ Holdaway said..

‘‘One of the driving factors is the rapid rise in the market for butter and therefore other fatbased products compared to whole milk. This really does highlight how quickly the market can turn based on new research and/or popular perceptions.

‘‘Not that many years ago we were giving butter to Russia in return for Lada cars.’’

Rangiotu dairy farmer, Robert Ervine said it was ‘excellent news’.

He said everyone was hanging on by their fingernails knowing the surplus milk powder would go, and now they expected prices would come more into balance.

‘‘We have had two seasons which had very low milk payouts and most dairy farmers will have increased their borrowing over that time.’’

He said most people would use this year’s higher milk price to get their overdrafts under control.

‘‘It also means maintenance which had been deferred will get done. For instance one year we didn’t put fertiliser on. We will be able to do that.’’

He said it also helped regional towns and cities.

‘‘It will be a catch up for us and them. It helps the business in the whole region.’’

The co-operative also announced a forecast earnings per share range of 45 to 55 cents.

‘‘We are seeing growing confidence on-farm across the country and, with global demand for dairy strengthening, the signs are for a good start to the season for our farmers and their rural communities although following a challenging period of very wet conditions for some of our farmers,’’ said Wilson.

Chief executive Theo Spierings said Fonterra was well positioned to take advantage of improving demand for dairy nutrition and ingredients.

‘‘Our forecasts are prudent given that we are still early in the season and we are starting with very low levels of inventory, and we are focused on continuing to demonstrate strong business performance so as to bring greater returns for our farmers.’’

Fonterra’s milk price increase will bring in an extra $500 million for the economy.

Dairynz says the additional farmer income will increase forecasted milk earnings to a total of $12.5 billion for the season.

The forecasted payout for the completed 2016-17 season remains at $6.15 with earnings per share of 40c and has yet to be confirmed by Fonterra.