Payout drop hits sharemilkers
The drop in milk price will have ‘‘a hell of an effect us’’, farmers say.
North Canterbury dairy farmer James Bourke wants to know how Fonterra’s basic milk price will help him get through the next few weeks.
As a sharemilker splitting costs and earnings with a farm owner, he and his wife, Ceri, are not eligible for Fonterra’s dividend payment or its short-term, interest-free loan.
It’s farmgate milk price and advance payments that he really cares about.
Fonterra’s farmgate price of $3.85 per kilogram of milksolids for the 2015-16 season was ‘‘obviously pretty tight’’, he said.
The Culverden farmer’s big concern was the co-op keeping its advance payment rate for August production at $3.15kg. The money is payable on September 20.
Many farmers have already survived on unusually low retrospective payments earned last season.
Bourke said advance payments helped to keep sharemilkers afloat at a time when farm costs were high and new-season milk was barely flowing.
Most sharemilking contractors were ‘‘were going to be in the firing line’’ because they were ineligible for Fonterra’s dividend – the extra 40-50c per kilogram the co-op has in store for fully paid-up shareholders.
Bourke said farmers could face a ‘‘reversal in equity’’ if the advance payout was too low to cover costs and the situation could be worse if cow values fell.
The Bourkes’ cows were valued $1400-$1500 the last time he sold, but lenders could revalue them and cut a farmer’s equity. ‘‘The biggest immediate issue would be the equity position, how banks view it,’’ Bourke said. ‘‘Hopefully there’s no reduction in $3.15 [advance].’’
Ashburton farmer owner Peter Ormsby and family milk 9000 cows. He thought Fonterra’s payout forecast would be lower but $3.85 was still worrying. ‘‘It’s going to be a hell of an effect on us, alright.’’
He was farming with his daughter and son-in-law, producing 3.6 to 3.8 million kilograms of milksolids annually.
Their cost of production was about $3.80 for each kilogram of milksolids. They would have to review all of their systems.
‘‘We’ve got a reasonable bit of debt, so we’ll be under pressure, alright.
‘‘I said to my staff, we want to be in a position to get gains again when we come right.’’