Glimmers of hope for dairy industry

Fonterra may not be flavour of the month but that hasn’t put investors off.

The company has raised $800 million in less than a week with a bond offer that was oversubscribed by 267%.

This is a sign that investors have more faith in Fonterra and the dairy industry than the doomsayers who’ve been prophesying disaster by focussing on the difference in this year’s payout compared with last years without pointing out that $5.10 is still the third best payout the company has made.

Those whose glasses are perpetually half empty also don’t take into account that while the figures in the income column are smaller, so are those in the expenditure one thanks to big drops in interest rates and the price of fuel and fertiliser.

We may not be rolling in clover, but we’re still growing grass and converting it to protein and while the world may not be paying as much as it was a few months ago there’s still a market for milk.

Rabobank’s senior analyst Hayley Moynihan  says the medium to long term outlook is still good and that global supply is contracting in Europe and the USA  while falling prices are making dairy products more competive which will increase demand.

There’s another glimmer of hope for us from DairyCo which reports that the British  milk supply is declining.

It’s too soon to break out the champagne again, but there’s enough hope there to postpone the order for hair shirts.

4 Responses to Glimmers of hope for dairy industry

  1. Hard Drive says:

    Could Fonterra be another Maddoff?

  2. Hard Drive says:

    It is sad for all of New Zealand that Fonterra is having its troubles—but the $800,000,000 is in a way,just another form of subsidisation—scary–could help keep the payout unrealistly high ?

  3. Hard Drive says:

    Having trouble posting to your site.
    Fonterra’s problems are a problem for all New Zealand.
    $800,00,000 extra debt is scary stuff indeed–just another form of subsidisation.

    Will it be used to buffer the payout?

  4. Pique Oil says:

    Fonterra has arranged storage space for milk powder. Here in the Manawatu they have rented 8000 sq metres which they are busy making bird and rodent proof. All over NZ they are doing the same and the total is reputed to be 70000 sq metres. That is an awful lot of milk powder! combine that with the reputed chiller space that is filled with butter and alarm bells are ringing in my head.
    Now we see $800 million borrowed for “general purposes”.Something is not quite right to my cynical mind and general purposes of 800 mill is a lot of unspecified expense

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