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

 


Growth in global milk pool 'unusual,' says Spierings

Growth in global milk pool 'unusual,' says Spierings, in cutting forecast

By Jonathan Underhill

July 29 (BusinessDesk) - The global market for dairy products have been in the unusual situation where most producers have been lifting supply, while demand weakened in China, Southeast Asia and the Middle East, says Fonterra Cooperative Group chief executive Theo Spierings.

The world's biggest dairy exporter today cut its Farmgate Milk Price forecast for the 2014/2015 year to $6 a kilogram of milk solids from a previous forecast of $7 kgMS, reflecting a slide in global dairy prices, which touched their lowest levels since December 2012 in the latest GlobalDairyTrade auction. It flagged a dividend of 20 cents to 25 cents, up from last year's 10 cent payment.

"All milk pools around the world showed significant growth - we see milk coming from everywhere," Spierings said. "On the demand side, China is looking at pretty high inventories" although in-market sales "are still very, very strong in China." Demand in Southeast Asia and the Middle East had dropped off faster than expected as rising prices were passed onto consumers, he said.

Fonterra doesn't expect to face the same production pressures as it did last season, when it produced milk powder at full capacity to meet demand from China. In the coming season it is possible the company lifts production of other products, he said.

The dollar fell to 85.13 US cents from 85.45 cents ahead of Fonterra's announcement and the trade-weighted index fell to 79.47 from 79.77 as traders and economists mulled the likely impact on the New Zealand economy and interest rates.

"Fonterra farmers’ farm-gate income will be collectively around $3.8 billion down from last year’s stellar season, though with a small offset through the share dividend expected to be higher over the season," ASB Bank chief economist Nick Tuffley said in a note. "The Fonterra update quantifies the impact of the decline in dairy prices seen since the original forecast was made. From an interest rate perspective the RBNZ has been taking into account the drop in GDT dairy prices and the stubbornness of the NZ dollar, with both factors being part of the decision to step to the sidelines."

Elevated dairy prices propelled New Zealand's terms of trade to a 40-year high in the first quarter of this year, providing a major impetus to the nation's growth, though economists say trade has probably peaked given the subsequent decline in prices of milk powder exports.

"Our forecasting anticipates some recovery in global dairy prices but it is too early to predict how strong this recovery will be or when it will kick in," chief executive Spierings said in a statement. “As we continue to drive for growth in our consumer and foodservice businesses, during the first half of the current financial year we expect reduced cost of goods arising from lower dairy commodity prices to have a positive impact on returns."

He said the lift in the dividend estimate was "based on zero ingredients stream returns at this early stage in the season," meaning it could yet be revised higher.

Units in Fonterra Shareholders' Fund, which give investors access to the company's dividends, rose 1.2 percent to $6.07.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Season Ends: Is Whitebaiting Sustainable?

The whitebait fry - considered a delicacy by many - are the juveniles of five species of galaxiid, four of which are considered threatened or declining. The SMC asked freshwater experts for their views on the sustainability of the whitebait fishery and whether we're doing enough to monitor the five species of galaxiid that make up whitebait. More>>

ALSO:

Crown Accounts: Smaller-Than-Expected Four-Month Deficit

The New Zealand government's accounts recorded a smaller-than-forecast deficit in the first four months of the fiscal year on a higher-than-expected inflow of corporate and goods and services tax. More>>

ALSO:

On For Christmas: KiwiRail Ferries Back In Full Operation After Quake

KiwiRail’s Interislander ferries are back in full operation for the first time since the Kaikoura earthquake, with the railspan that allows rail wagons to be loaded on the Aratere now restored. More>>

ALSO:

Comerce Commission Investigation: Prosecutions Over Steel Mesh Labelling

Steel & Tube Holdings, along with two other companies, will be prosecuted by the Commerce Commission following the regulator's investigation into seismic steel mesh, while Fletcher Building's steel division has been given a warning. More>>

ALSO:

Wine: 20% Of Marlborough Storage Tanks Damaged By Quake

An estimated 20 percent of wine storage tanks in the Marlborough region, the country’s largest wine producing area, have been damaged by the impact of the recent Kaikoura earthquake. More>>

ALSO:

ACC: Levy Recommendations For 2017 – 2019 Period

• For car owners, a 13% reduction in the average Motor Vehicle levy • For businesses, a 10% reduction in the average Work levy, and changes to workplace safety incentive products • For employees, due to an increase in claims volumes and costs, a 3% increase in the Earners’ levy. More>>

Women's Affairs: Government Accepts Recommendations On Pay Equity

The Government will update the Equal Pay Act and amend the Employment Relations Act to implement recommendations of the Joint Working Group on Pay Equity. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news