Fonterra drops forecast payout

Newsletter from Fonterra chair John Wilson:

Today we’ve unfortunately had to announce that the forecast Farmgate Milk Price for the 2014/15 season is being reduced from $4.70 per kgMS to $4.50 per kgMS.

When combined with the previously announced estimated dividend range of 20-30 cents per share, this amounts to a forecast Cash Payout of $4.70 – $4.80 for the current season.

The 20 cent drop in the forecast means we have had to reduce the Advance Rate payments, particularly over winter which will have a significant impact on farm budgets.

The updated Advance Rate schedule will be available on Fonterra Farm Source later this morning.
There is still a lot of volatility in international dairy commodity prices caused by over-supply in the market.

We have confidence in the long-term fundamentals of international dairy demand but, right now, the market is out of balance. GDT prices for products that set our forecast Farmgate Milk Price have fallen 23 per cent since February.

Given the uncertainty, there continues to be further risk.

We also announced today that our latest estimate of New Zealand milk production for the current season is 1,607 million kgMS. This is based on recent growth conditions on-farm but will depend on conditions for the rest of the season.

Westland dropped its forecast yesterday too.

It’s disappointing but not unexpected.

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