Fonterra’s board is meeting today and one of the major items on the agenda will be a decrease in the payout which has already been dropped from $6.60 at the start of the season to $6.
I’m picking it could go down to $5.
Westland’s payout projection has already dropped from $5.20 to $5.60 a kilo of milk solids to $4.10 to $4.50, partly because of foreign exchange dealings. We don’t know what Fonterra’s exposure to foreign exchange is nor do we know if milk prices will continue to fall and even if they have bottomed out growing stock piles of milk powder and EU subsidies will hamper any rapid improvement.
Dairy farms are starting to look for staff for next season so if the payout does drop by $1 it will have an impact on pay negotiations. When contracts were being negotiated this time a year ago it was on the expectation of a good payout which might get better. Now falling commodity prices and global uncertainty are painting a far less rosey picture.