Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Fonterra cuts 2014 milk payout forecast to $8.40

Fonterra cuts 2014 milk payout forecast to $8.40, flags $7 for 2015

By Jonathan Underhill

May. 28 (BusinessDesk) - Fonterra Cooperative Group, the world’s biggest dairy exporter, cut its forecast 2014 milk payout by 2.9 percent and said it expects the payout for the 2015 season to tumble to $7 per kilogram of milk solids, reflecting a decline in world dairy prices and increased global supply.

Auckland-based Fonterra cut its forecast for the current season ton $8.40/kgMS from the previous estimate of $8.65/kgMS, which would have been a record. Its dividend forecast was kept unchanged at 10 cents a share, having been slashed by two thirds in December, and the dairy producer affirmed its guidance for earnings.

“Dairy commodity prices have come off the peak reached in early February this year, as global supply and demand have rebalanced," chief executive Theo Spierings said in a statement. "The shift in supply and demand over the past few months showed that volatility continued to exert a strong influence over the global outlook for dairy."

Dairy product prices have dropped 23 percent since Fonterra's board forecast a record milk payout in February. The board had used its discretion that month to keep the forecast payout 70 cents lower than what it would be using calculations from the regulated milk price manual, citing a production mismatch where the price of whole and skim milk powder surged ahead of higher margin products such as cheese and butter.

“After seeing recent improved stream returns on powders and other products, and considering the level of risk likely in the remaining three months of the financial year, the board has decided to reduce that 70 cent gap by 15 cents, to 55 cents," chairman John Wilson said today.

The kiwi dollar edged up to 85.51 US cents after the announcement, from 85.38 cents immediately before. The forecast 2015 payout is in the middle of the $6.50 and $7.50 per kg/MS expected by economists, according to Bank of New Zealand.

Dairy product prices fell to a new 15-month low in the latest GlobalDairyTrade auction last week.

Fonterra said it expects milk supply for next season of 1.6 million kgMS, up 2 percent on the current season forecast of 1.58 million kgMS. Supply was also likely to increase in other markets.

"There is currently more milk available for the international market to absorb," Spierings said. "We expect demand from China to remain strong. In Russia, there will be pressure on the balance between imports and local production. These factors are expected to continue influencing the supply-demand balance.”

Units in the Fonterra Shareholders' Fund, which gives investors exposure to the group's dividends, rose 1.4 percent to $6 yesterday, and have gained 3.5 percent this year.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Scouring: Cavalier Merger Would Extract 'Monopoly Rents' - Godfrey Hirst

A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly, says carpet maker Godfrey Hirst. The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition. More>>


Scoop Review Of Books: She Means Business

As Foreman says in her conclusion, this is a business book. It opens with a brief biographical section followed by a collection of interesting tips for entrepreneurs... More>>


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Housing: English On Housing Affordability And The Economy

"Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle. And those lead times increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed. The resulting excess supply could produce a price crash..." More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news