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Dairy Farmers Pleased With Forecast, Urge Caution

7 December 2004
PR 221/04

Dairy Farmers Pleased With Forecast, Urge Caution

Dairy farmers are encouraged by Fonterra Co-operative Group bumping up its payout forecast in the 2004/5 season, said Kevin Wooding, Chairman of Dairy Farmers of New Zealand (DFNZ).

His comments follow Fonterra today raising its forecast payout to $4.30 a kilogram of milk solids in the year ending May 2005, from the previously forecast $4.05. The co-op also increased its estimated fair value share price.

"We have consistently said that the $4.05 forecast in early October was a bit on the low side, given the ongoing strength of commodity prices. Dairy farmers will be pleased that Fonterra has updated this conservative forecast to a level that is more reflective of anticipated returns in the 2004/5 season," Mr Wooding said.

"Assuming the forecast is accurate, the higher payout will help farmers who are struggling to contain their business expenditure. Higher credit costs, local government rates demands, fuel and fertiliser prices have been significantly adding to the expense of running dairy farms."

Though welcoming the higher forecast, Mr Wooding cautioned dairy farmers that payouts above $4 might not be sustainable next season.

"The weaker U.S. dollar is obviously putting a lot of pressure on Fonterra's New Zealand dollar returns. And there is a risk that the favourable factors holding up dairy commodity prices might take a turn for the worse.

"I would encourage farmers not to grow over confident or sanguine about the future. They should continue their prudent approach so they can weather any possible downturn in future."

DFNZ is the dairy industry group of Federated Farmers of New Zealand (Inc).


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