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

 

Taxing Multinationals: EU Ruling Sours Apple

Shares of Apple slid, down 0.9 percent as of 3.08pm in New York, after the European Commission ruled that Ireland granted the company undue tax benefits of up to 13 billion euros (US$14.5 billion)—"illegal aid” under EU rules that the commission says Ireland now must recover from Apple. More>>

ALSO:

NZX Review: Best Practice Code Recommends Code Of Ethics

NZX, the sharemarket operator, is seeking feedback on proposed changes to its corporate governance best practice code including a published code of ethics, rules about share trading and continuous disclosure, and more transparency over board appointments and chief executive pay. More>>

ALSO:

Auditors:

Signs Of Life? SETI On Russian Space(?) Signal

A star system 94 light-years away is in the spotlight as a possible candidate for intelligent inhabitants, thanks to the discovery of a radio signal by a group of Russian astronomers... Could it be a transmission from a technically proficient society? At this point, we can only consider what is known so far. More>>

Post-Post: Brian Roche To Step Down As NZ Post CEO

Brian Roche will step down as chief executive of New Zealand Post in April 2017, having led the state-owned postal service's drive to adjust to shrinking mail volumes with a combination of cost cuts, asset sales, modernisation and expansion of new businesses. More>>

ALSO:

Company Results: Air NZ Rides The Tourism Boom With Record Full-Year Earnings

Air New Zealand has ridden the tourism boom and staved off increased competition to deliver the best full-year earnings in its 76-year history. More>>

ALSO:

New PGP: Sheep Milk Industry Gets $12.6M Crown Funding

The Sheep - Horizon Three programme aims to develop "a market driven, end-to-end value chain generating annual revenues of between $200 million and $700 million by 2030," according to a joint statement. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news