Milking it
Final payout of $7.19 a kilo worth $650m
Buying feed supplements and paying off debt will be the priorities for Northland dairy farmers from a bumper final payout of $7.19 a kilogram of milk solids – worth almost $650 million.
Dairy giant Fonterra has announced the final farmgate price of $7.14 a kg/MS and a dividend of five cents a share for the 2019/2020 season which will earn Northland dairy farmers nearly $649 million.
The figure is based on about 90 million cu metres of milk solids Northland dairy farmers supply to Fonterra each year.
The final payout is the fourthhighest ever and comes on the back of an increase in Fonterra’s net profit by more than $1 billion, a decline in debt by a similar amount, and a strong milk price.
Federated Farmers Northland acting dairy chairman Matt Long said it was a “good payout” given that parts of the North Island endured the worst of the recent drought when they were forced to buy supplement feed.
The highest payout to date was in the 2013/14 season when the farmgate milk price was $8.40 a kg/MS. “Initially, the final price looked like it was going to be a bit higher but the demand took a dive due to Covid but $7 is quite good if the weather conditions are favourable,” Long said. “Farmers are able to buy feed now and I’d imagine based on the drought, they would be trying to pay off debts as well. The payout will pump a lot of extra money into the local economy.” He milks about 200 cows on his Kaiatea Rd farm in Ngunguru. Long said businesses would benefit and while the payout would not be a huge boost to them, it would help during the Covid economic hit. It was really good to see Fonterra returning to black, he said, through sensible strategies and he hoped for a positive outlook for farmers and the dairy co-op.
“It’s still very uncertain but there
seems to be a global demand for dairy products, which is really good.”
Northland Chamber of Commerce chief executive Stephen Smith is urging farmers to spend their earnings on businesses that need all the help they can get following the lockdown.
“Primary industries have always had a steady influence on the local economy. The size of the payout is surprising given what farmers have been faced in the last 12 months with drought and later flooding and to come through and perform in this manner is fantastic news.
“Their first priority is debt reduction so they are able to survive during tough times.
Farmers are genuine business operators. They are well-educated, they understand finance and longterm planning.”
Smith said besides paying off their debt, hopefully they spent their money on things such as tractors, trucks and cars and invested in local tourism ventures if they were unable to go overseas on holiday.
Primary industries have always had a steady influence on the local economy. Stephen Smith
Fonterra chief executive Miles Hurrell said he was proud of how farmers and employees have come together to deliver strong results in a challenging environment by juggling the extra demands and stress of Covid-19.
“This time last year we were announcing our new strategy and customer-led operating model. We were clear that to build a sustainable future we needed to focus on three interconnected goals – healthy people, a healthy environment and a healthy business,” Hurrell said.
He said Fonterra delivered a strong performance in the first half of 2019/20 but the flow-on effects of coronavirus impacted on trading in the second half, especially in its consumer and food service businesses.
The co-op also announced the 2020/21 forecast farmgate milk price range of between $5.90 and $6.90 a kg/MS and a 20-35 cents a share.
Fonterra chairman John Monaghan said the impact of Covid19 was still playing out globally.
“From a milk price perspective, the supply and demand picture remains finely balanced and for that reason, we are maintaining our previous forecast range for this season,” he said.