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Stunning end to a roller-coaster August for Fonterra

27 August 2013

Stunning end to a roller-coaster August for Fonterra

A roller-coaster month to forget for Fonterra Cooperative Group looks set to end on a high, with the Cooperative revising its 2013/14 season forecast milk price to $7.80 per kilogram of milksolids (kg/MS). This is up from the $7.50 kg/MS announced late last month.

“It has been a hellishly tough month for Fonterra but this revision underlines that the fundamentals of the New Zealand dairy industry remain strong,” says Willy Leferink, Federated Farmers Dairy chairperson.

“New Zealanders should rejoice that the immediate financial damage from the recall and market access issues elsewhere, will not dent the economy. With an eye to the future, we’ve got to accept that we cannot afford a repeat of this month’s problems, but right now, this confidence in the dairy industry is a huge relief.

“From the Chicago Mercantile Exchange to Global Dairy Trade, the markets have delivered their own verdict. However, we still have a lot of bridge-building to do and a heck of a lot of things to learn but learn them we will. We will be back better because we have to be.

“How Fonterra got slammed for being the whistle blower remains a complete mystery to me. For those markets that remain problematic, can we ask them to please trust science and to trust New Zealand official assurances.

“The prices we are getting for our dairy exports reflects the reality that the amount of surplus milk for global export remains wafer thin. Two weeks after Fonterra initiated its precautionary recall, US analyst Robin Schmahl commented, “It certainly has caused concern for the world dairy industry and Fonterra in particular with inquiries being conducted, however, it was virtually a non-issue in the milk futures market”.

“Of course this is a forecast and we are coming off a stunning winter, which now has many farmers scratching their head about what will happen next. Last season’s drought and the one a few years’ back really underscore why water storage is infrastructure of national significance. We’ve got to get on with it.

“So these numbers add the cream on top. It is a cream that is some way off from being in the bank so farmers need to budget conservatively in order to knock off the debt built up over the drought.

“To me Mark Twain provides the best reply to the great kiwi clobbering machine that seemed to delight in our earlier problems: “the rumours of my death have been somewhat exaggerated,” Mr Leferink concluded.

ENDS

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