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

 

Fossils: Ancient Penguins Lived Alongside Dinosaurs?

Penguins are much older than previously thought and their evolution probably dates back to the days of the dinosaurs, according to research on the fossilised leg bone and toes of a giant ancient penguin found in rocks near Waipara, North Canterbury. More>>

No Voda/Sky: Commission Declines Clearance For Merger

The Commerce Commission has declined to grant clearance for the proposed merger of Sky Network Television and Vodafone New Zealand. More>>

ALSO:

EARLIER:

Power: IEA Report On New Zealand's Energy System

Outside of its largely low-carbon power sector, managing the economy’s energy intensity and greenhouse gas emissions while still remaining competitive and growing remains a challenge. More>>

ALSO:

NASA: Seven Earth-Size Planets Around A Single Star

NASA's Spitzer Space Telescope has revealed the first known system of seven Earth-size planets around a single star. Three of these planets are firmly located in the habitable zone, the area around the parent star where a rocky planet is most likely to have liquid water. More>>

ALSO:

Auckland Transport Case: Men Guilty Of Corruption And Bribery Will Spend Time In Jail

Two men who were found guilty of corruption and bribery in a Serious Fraud Office (SFO) trial have been sentenced in the Auckland High Court today... The pair are guilty of corruption and bribery offences relating to more than $1 million of bribes which took place between 2005 and 2013 at Rodney District Council and Auckland Transport. More>>

ALSO:

Hager Raid: Westpac Wrong To Release Bank Records To Police

The Privacy Commissioner has censured Westpac Banking Corp for releasing without a court order more than 10 months of bank records belonging to the political activist and journalist Nicky Hager during a police investigation into leaked information published in Hager's 2014 pre-election book, 'Dirty Politics'. More>>

ALSO:

EARLIER:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news