Fonterra drops payout to $6

Fonterra has announced its forecast payout for this season has dropped by a dollar:

Fonterra Co-operative Group Limited today reduced its forecast Farmgate Milk Price for the 2014/15 season from $7.00 to $6.00 per kgMS and announced an estimated dividend range of 20-25 cents per share – amounting to a Forecast Cash Payout of $6.20-$6.25 for the current season.

Chairman John Wilson said the lower forecast Farmgate Milk Price reflected continuing volatility, with the GlobalDairyTrade price index declining 16 per cent since the start of the season on June 1.

“We have seen strong production globally, a build-up of inventory in China, and falling demand in some emerging markets in response to high dairy commodity prices.  In addition, the New Zealand dollar has remained strong. Our milk collection across New Zealand last season ending 31 May 2014 reached 1,584 million kgMs, 8.3 per cent higher than the previous season.

“This drop in the forecast Farmgate Milk Price will have an impact on our farmers’ cash flows.We continue to urge caution with on-farm budgets in light of the continuing volatility in international dairy markets,” said Mr Wilson.

Chief Executive Theo Spierings said the increase reflects the Co-operative’s expectations for improved returns on its value-add and branded products, given volume increases and lower input costs.

“As we continue to drive for growth in our consumer and foodservice businesses, during the first half of the current financial year we expect reduced cost of goods arising from lower dairy commodity prices to have a positive impact on returns.

“It is important to note that in light of the significant volatility, our dividend estimate is based on zero ingredients stream returns at this early stage in the season.

“We continued driving our V3 strategy throughout the previous season and that is why we can support an increased estimated dividend range for the 2014/15 financial year.

“Our forecasting anticipates some recovery in global dairy prices but it is too early to predict how strong this recovery will be or when it will kick in. . .

This drop was expected after successive drops in price in GlobalDairyTrade auctions and volatility in world markets.

It certainly isn’t welcome but it shouldn’t be regarded as cause for panic either.



18 Responses to Fonterra drops payout to $6

  1. Freddy says:



  2. Mr E says:

    This will hurt all Dairy farms and pin some to the wall.
    The Greens policy model has been to tax the dairy sector because they can afford it. But the dairy sector can’t.


  3. Judge Holden says:

    Why can’t the dairy sector afford to pay tax? Too much leverage?


  4. homepaddock says:

    The dairy sector does pay tax but it doesn’t want to pay more and higher taxes which Labour and the Green Party would impose.


  5. jabba says:

    I can’t understand anyone being happy to see our dairy sector under pressure


  6. Judge Holden says:

    Yes, and they did it to themselves, that’s what really hurts. If their margins are so thin that they can’t afford to pay for the damage they do and resources they use should they be doing what they’re doing?


  7. Andrei says:

    Its the dairy industry that earns the money that will be spent when you get your hemorrhoids fixed for free on the public health Judge Holden.

    You really should appreciate what they provide the community


  8. TraceyS says:

    But Andrei, it is clear that the socialist Judge prefers “user-pays”.


  9. Mr E says:

    The Greens want rivers to be cleaner than those that run through native bush. Purified, some say. And they want dairy farmers to pay. Not others. Not towns folk where the dirtiest rivers exist. Nope, let’s forget them. They don’t matter.
    Tracey, Greens policy has nothing to do with user pays. It is to do with wealthiest pays, or the easiest target pays, I can’t decide. Now the pay out has fallen it seems most likely that it is the easiest target pays.
    Although it is fair to say I have been sensing a revolution. Farmers seem less likely to tolerate bullying than they used to. I sense a change in the tide.


  10. TraceyS says:

    Absolutely the Greens policy is user pays….and pays, and pays until their money runs out. Such a wicked combination is environmentalism and socialism!


  11. Judge Holden says:

    Yeah, wicked. Fancy wanting polluters to pay for the damage they cause, rather than the rest of us? Where do they get off?


  12. Gravedodger says:

    Meanwhile “whining diff” with grandiose pretensions, you and your ideological idjit mates continue to destroy good people by purchasing their pride and self respect with welfare and guess who is forced to fund that cleanup after having their hard earned money stolen to fund the disastrous welfare.


  13. Judge Holden says:

    God you’re a weirdo.


  14. TraceyS says:

    Polluters are paying for the damage they cause. Here are a handful of examples:$50,000-for-effluent-offences

    I don’t see the various Judges (real ones) considering whether the accused can “afford to pay”. This doesn’t, and shouldn’t, come into the decision of whether or not someone is a polluter. You don’t suddenly become excused from polluting because you’ve got little money. Likewise, your pollution cannot automatically be assumed to be worse because you are richer or happen to operate within an industry which appears to be doing well at a fixed point in time.

    ”…at the currently projected pay-out for milk solids, even dairy farms in the lowest decile would remain well above break even in the face of an emissions levy”

    How is this OK as a justification for the Green’s proposed carbon tax? What happens when income drops or expenses rise? Do the taxes abate or is the definition of polluter adapted to suit the reality of who can afford the luxury of polluter status?

    Which raises the question of at what level of financial performance is it suitable to tax so-called polluters? The BERL quote above hints at “break even”. Like the prospect of breaking even ever got people out of bed in the morning! It might be acceptable for the left if everyone in our society had just enough to get buy on – no more more and no less – but business needs the prospect of doing a little better than that if for no better reason than you don’t know what’s coming around the next corner. Heck, unbeknownst it could even be some favoured green project coming which will cut your trade.

    “Dr Norman also noted that 30 jobs had been lost at Fox Glacier because ice retreat caused by increased warming meant it could only be reached by helicopter, not by walking.”

    But I don’t hear him complaining that 30 to 40 jobs may be lost in Dunedin because of a planned cycle-way. No doubt that is just bad luck.

    Because I guess there are good businesses and bad ones in the Greens eyes and they consider themselves to be the people qualified to pick the winners and losers.

    But I am anticipating that the country will decide otherwise on Sept 20.


  15. Judge Holden says:

    Being fined for breaching the law (which already allows them to pollute) isn’t paying for the pollution you cause in the chase for wealth; it’s seen by many farmers as a mere cost of doing business. That’s why these guys haven’t bothered to establish legal practices in the first place. To suggest otherwise is lame, even by your standards.


  16. farmerbraun says:

    Really Judge, most of the people who are responsible for increasing the fertility of NZ’s relatively poor soils are long dead. This process began about 150 years ago.
    There is no good science which says that it all happened in recent times. The fact is that we cannot have fertile soils without enriching the waterways to some extent.
    It is well known that the Thames River in England has a nitrate level that is approximately 70 times that of the worst NZ rivers.
    But then they had hundreds of years of agriculture before we even started.

    Nevertheless , the current custodians of the land are fronting up and taking responsibility.


  17. farmerbraun says:

    Just for the record , the inflation adjusted average payout of the 10 seasons prior to the one just ended is $6.25/Kg M.S.

    That is about half of what farmers were receiving in the 1950s.


  18. TraceyS says:

    Maybe the fines aren’t enough to cover the true cost in the case of gross breaches of the law, but the Judge (the real one I mean) in the case of the $66k fine could have awarded a much bigger penalty:

    “Judge Kellar said the seriousness of the offending was reflected in the maximum available fine of $600,000 on each charge.”

    But sometimes fines are given where there is no damage actually done to public amenities or resources:

    “Sharemilker Pieter Dirk Ackermann was fined $5000 yesterday by Judge Smith for breaching a rule in the regional plan by allowing effluent to pond on a 603-cow dairy farm at Paisley Rd, near Balclutha.”

    I don’t agree that “many” farmers see getting carted off to Court and the ensuing costs/fines as business-as-usual. Most try to stay above the law.

    There is the argument that no amount of fines/penalties will be enough to fix environmental effects where these are cause. But this argument goes for tax as well. Really what a tax is doing is trying to deter people from farming in the first place by making it harder to make a dollar. That’s not very wise. You might think this would deter the greedy (and it might) but it would also deter the conservative. Risk averse, these are the types we should be encouraging rather than discouraging.


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