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An Enviable Dilemma

23 June
2000
PR 57/2000

AN ENVIABLE DILEMMA

Commenting on end-of-season payouts and next years projections, Chairman of Dairy Farmers of New Zealand Charlie Pedersen said that "The spectre of some of the best returns the dairy industry has ever enjoyed poses interesting questions on and off farm".

"On-farm, without doubt farmers will welcome the boost in their incomes after a couple of challenging seasons that have seen escalation of deferred maintenance on most farms." Mr Pedersen added that " the additional returns however are significant and pose serious options. Does one contemplate expansion or intensification or should a farmer reduce debt and increase equity to use in that inevitable period of poorer returns that will follow these days as sure as dogs chase milk tankers. ?"

"Off farm these good returns pose much the same question," said Mr Pedersen " The industry is already pursuing the growth strategy and has recently announced proposals to invest in Bonlac in Australia and in Dairy Farmers of America in the USA"

"These and any further expansion and investments will be funded by retentions from farmer payout. Industry may be tempted to retain quite hefty chunks of cash from this and next year's earnings. Mr Pedersen cautioned however that farmers will want and need to be consulted on such retentions " especially bearing in mind that their share values are set at what amounts to a fraction of their real value and they wont necessarily increase despite heavy investment in them by farmers."

"It is a marvellous time of opportunity for our industry with multiple options that farmers need to consider and decide on" concluded Mr Pedersen''

ENDS

For further information: Charlie Pedersen 06 329 9896 or 025 463 480 Kevin Petersen 04 473 7269


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