Farm­ers gain but still no rain

South Waikato News - - RURAL DELIVERY -

Fon­terra has in­creased its fore­cast milk price for the 2010/2011 sea­son by 30c to $6.90. The fore­cast dis­tributable profit range for the 2011 fi­nan­cial year was un­changed at 40 to 50c per share, as was the tar­get div­i­dend range of 25 to 35cps, the com­pany said to­day.

The es­ti­mated fair value share price for the next sea­son in 2011/2012 was $4.52, the same as this sea­son’s price.

Fon­terra chair­man Sir Henry van der Hey­den said the de­ci­sion to raise the fore­cast milk price re­flected the con­tin­u­a­tion of high in­ter­na­tional dairy prices fur­ther into the 2010/2011 sea­son.

But farm­ers were po­ten­tially fac­ing much higher in­put costs if dry weather con­tin­ued.

‘‘It is still early in the sea­son, and some good rain­falls could help a lot but milk pro­duc­tion in the North Is­land is de­clin­ing and we know farm­ers in some re­gions are strug­gling,’’ Sir Henry said.

Chief ex­ec­u­tive An­drew Fer­rier said global mar­kets for key dairy in­gre­di­ents re­mained finely bal­anced with solid de­mand be­ing un­der­pinned by some growth in sup­ply out of the north­ern hemi­sphere.

‘‘ In­ter­na­tional dairy mar­ket prices have gen­er­ally held up bet­ter than ini­tially ex­pected when we made the open­ing fore­cast in late May.

‘‘Off­set­ting this good news has been a stronger New Zealand dol­lar which is erod­ing the value of dairy ex­port re­turns for our farm­ers,’’ Mr Fer­rier said. A solid re­sult at the De­cem­ber 1 global Dairy­Trade event, with av­er­age prices 1.5 per cent up from a month ear­lier had added to con­fi­dence in the sea­son’s out­look.

Fon­terra was re­view­ing the po­ten­tial im­pact of the re­cent dry con­di­tions on an­tic­i­pated pro­duc­tion lev­els.

The com­pany said the rise in the un­der­ly­ing milk price would lead to a rise in the monthly pay­ments to farm­ers.

But there was no change to the per­cent­ages in the ad­vance rate sched­ule, which dic­tates the pro­por­tion of the milk price paid in ad­vance to farm­ers dur­ing the sea­son through monthly milk cheques.

Fon­terra has held its fore­cast dis­tributable profit range for the fi­nan­cial year to July 2011 at $550 to $690 mil­lion which would equate to 40 to 50cps.

The fore­cast tar­get div­i­dend range was also un­changed, at 25 to 35cps.

Mr Fer­rier said al­though there was no change to the over­all fore­cast profit range, man­age­ment’s lat­est es­ti­mate had moved down to the lower end of the fore­cast range, mainly due to the pres­sure on earn­ings from the in­crease in the milk price and the strength of the New Zealand dol­lar.

The earn­ings im­pact was mostly be­ing felt in the com­modi­ties and in­gre­di­ents busi­nesses, with the per­for­mance of the con­sumer busi­nesses re­main­ing in line with the pre­vi­ous fore­cast.

As a con­se­quence of to­day’s an­nounce­ment Fon­terra now fore­casts that a 100 per cent share backed farmer will earn, on av­er­age, the equiv­a­lent of $7.30 to $7.40 be­fore re­ten­tions, com­pris­ing milk price plus dis­tributable profit.

On a cash ba­sis the same farmer was fore­cast to re­ceive a to­tal of $7.15 to $7.25, com­pris­ing milk price and div­i­dend with the bal­ance of the profit be­ing re­tained by the co­op­er­a­tive.

GO­ING UP: Fon­terra has in­creased its fore­cast milk price by 30 cents.

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