Fonterra’s announcement that it is holding the season’s forecast payout at $4.70 with an estimated dividend range taking it to $4.95 – $5.05 for the current season will have disappointed many after successive increases in the GlobaDairyTrade auction and commentators had suggested an increase to $5.
Chairman John Wilson said that although dairy commodity prices had gone up, the increase was not sufficient to raise the forecast Farmgate Milk Price at this time.
“Since December, GDT prices for Whole Milk Powder have increased 45 per cent and Skim Milk Powder prices have increased 13 per cent,” Mr Wilson said.
“There continues to be significant volatility in international commodity prices. New Zealand volumes are down, with continued uncertainty in milk production due to climatic conditions in New Zealand with droughts in Canterbury, Marlborough, Central Otago and North Otago.
“Today’s forecast reflects the Board and management’s best estimates at this time. We are advising farmers to continue to be cautious with budgeting and we will update them as the season progresses.”
Chief Executive Theo Spierings said Fonterra was sticking to its strategy, with confidence in the long-term fundamentals of dairy demand.
“We will provide a full business update when we report our Interim Result on 25 March,” Mr Spierings said.
Fonterra is required to consider its forecast Farmgate Milk Price every quarter as a condition of the Dairy Industry Restructuring Act (DIRA). . .
Fonterra Shareholders’ Council Chairman, Ian Brown said the Co-operative’s announcement to maintain the 2014/15 forecast Farmgate Milk Price at $4.70 per kg/MS will be a relief for Farmers.
Mr Brown: “On-farm conditions have been really tough throughout the country and Farmers will be pleased that the recent downward trend has stopped.
“It has also been encouraging to see GlobalDairyTrade, and in particular Whole Milk Powder prices, increase significantly recently and given what took place late last year it will go some way to building confidence on farm.”
Mr Brown said that Farmers will be looking with great interest when the forecast dividend is announced at the interim results in late March.
“Our Farmers will want to see the strategy, which is key to adding value long term, deliver a return relative to the significant investment they have made and continue to make in their Co-op.
“In the interim, as always, the Council urges Farmers to be prudent in their financial planning to ensure they place their businesses in the best possible shape for next season.”
There is time for an increase but any is likely to be modest.
Most of this season’s milk has already been sold and while the outlook is more optimistic it is still volatile.