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Better News From Fonterra

10 June 2004

Better News From Fonterra

Dairy farmers have welcomed an increase in forecast payouts from Fonterra Co-operative Group, said Kevin Wooding, Chairman of Dairy Farmers of New Zealand (DFNZ).

"The increases are positive news for Fonterra suppliers who, like other farmers, are facing higher spending on costs such as fuel, electricity and local government rates," he said. DFNZ is the dairy industry group of Federated Farmers of New Zealand (Inc).

"The increased forecast is a much-need boost to morale for dairy farmers, giving them confidence in the underlying strength of the industry. In addition to helping cash flow, the increase will have flow-on benefits to rural communities."

Mr Wooding's comments follow Fonterra forecasting a payout of $3.85 a kilogram of milksolids in the season which began June 1. Though revised higher, the forecast is still low by historical standards. If accurate it will be the lowest inflation-adjusted payout in seven years.

Fonterra's previous forecast was $3.50 -- which would have been the lowest inflation-adjusted payout in 14 years.

"The 35 cent increase in this year's forecast is a much-needed increase from the very low $3.50. For the average farmer producing 90,000 kilograms of milk solids a year, total income will rise $31,500," he said.

"That will have consequences for the wider economy. Fonterra collects about 1.15 billion kilograms of milk solids a year, meaning $400 million will be added to the domestic economy."

Mr Wooding said he was disappointed at forecasts this week from the Ministry of Agriculture and Forestry. One of the forecasts said the Fonterra payout would drop to $3.06 in 2005/6.

"Farmers should be cautious about MAF's forecasts, which are based on many assumptions and are likely to be revised," Mr Wooding said.


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