Payout cut will cost farmers

A drop in Fonterra’s payout for the season will cut $21 million from South Canterbury farmers’ expected income.

Fonterra announced a payment of $8.40 per kilogram of milksolids yesterday, down from the $8.65 figure forecast earlier this year.

South Canterbury Federated Farmers dairy section chairman Ryan O’Sullivan said it was disappointing the forecast had lowered and farmers would have budgeted for the higher figure, but not all was lost.

‘‘It’s still a good amount. It’s [the payout] not going to affect anyone majorly,’’ O’Sullivan said.

It would still be an improvement on last year’s payout of $5.84.

O’Sullivan said he would be concerned if any farms were on struggle street after the small decrease.

‘‘If a farm needs to clear $8.60, then they will be in dire straits.’’

However, he warned next year’s forecast figure would drop a further $1.40 to $7.

He said farmers would need to budget for the lower amount.

O’Sullivan said although the payouts are high and guaranteed, environmental constraints are stopping a number of dairy conversions happening in the region.

He said strict criteria surrounding nutrient discharge have been put in place by Environment Canterbury and dairy farm nutrient discharge is extremely high.

‘‘It’s a lot more complex and a lot more time-consuming to convert now.

‘‘Payout is probably second on the list for consideration,’’ he said.

Federated Farmers Dairy chairman Willy Leferink said the 25 cent kg/MS haircut for the current season is not a surprise when GlobalDairyTrade auction prices have slid 22.6 per cent since their early February peak.

‘‘Right now, the world needs one and a half times what we produce every year just to stand still.

‘‘The global population is going up but global dairy production isn’t keeping pace.

‘‘We will have bumper years like this one and pretty good years like what’s forecast, so the trend line is positive,’’ Leferink said.

DairyNZ chief executive Tim Mackle said the season had been a ‘‘cracker’’ and dairy farmers should still be celebrating.

He said milk production to the end of April was up 9.5 per cent nationally compared with the same time last year.