Fonterra told: fess up
Fonterra should tell farmers as soon as it is confident the milk price forecast will have to change, says the company’s shareholder council chairman.
There’s growing speculation the big co-operative will have to downgrade its milk price forecast of $4.60kg milksolids after the second Global Dairy Trade product auction of the new year posted another fall in the average price achieved.
Fonterra chairman John Wilson said in an email to farmer-shareholders after this week’s 1.4 per cent GDT price fall: ‘‘I know you will be considering what this may mean for the farmgate milk price.
‘‘We will update the milk price forecast to farmers if a revision is required based on forecasts for the balance of the financial year,’’ Wilson said.
Council chairman Duncan Coull was cautious about acknowledging pressure on the forecast but said if there was any doubt in the company about the $4.60kg guidance he wanted it communicated to farmers.
‘‘I’d like that communicated as soon as they have confidence that there is a change in that number,’’ he said.
‘‘I think most farmers, as hard as it may be, have conditioned themselves to a lower milk price this year – we started at $3.85. But it’s a worrying sign seeing GDT levels where they are currently at.’’
Fonterra, with dividendbearing units listed on the New Zealand and Australian stock exchanges, also has disclosure obligations to market investors.
Before this week’s GDT result, Fonterra’s chief financial officer Lukas Paravicini said New Zealand’s biggest milk processor was due to next review its forecast in March. It was required by industry legislation to review its milk price forecast quarterly, he said. The last update was in December.
The GDT price of milk price determiner, whole milk powder, fell 0.5 per cent to US$2188/tonne last week and another mainstay export staple, skim milk powder was down 3.2 per cent to US$1835.
The company has said the price of whole milk powder would have to rise to US$3000 by mid-autumn to maintain the forecast price.
The second biggest processor, Open Country Dairy, this week downgraded its milk price guidance 30c to $4-4.30/kg.
Fonterra chairman John Wilson told farmer-shareholders: ‘‘We will update the milk price forecast to farmers if a revision is required.’’