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

 

Fonterra revision eats intro farm budgets

29 July 2014

Fonterra revision eats intro farm budgets

While a downwards revision in Fonterra’s benchmark forecast for 2014/15 was widely expected, it has fallen lower than expected to be $6 per kilogram of Milk Solids (kg/MS). A dividend of 20-25 cents per share helps to soften things for a fully shared up farmer.

“The revision has turned our season from being ‘lite’ to ‘super trim,’ says Andrew Hoggard, Federated Farmers Dairy chair.

“While the size of the drop is a surprise the revision wasn’t, given GlobalDairyTrade’s slide over much of the current season. Several weeks ago we agreed with the banks it could be in the $6 to 6.25 kg/MS range but we thought it would have been a less severe haircut.

“It means farmers will need to watch costs closely and cut their cloth accordingly. It means getting back on the computer to reforecast farm budgets. One thing for sure, the margin between operating costs and revenue has appreciably closed up.

“We recommend farmers talk to their bank manager, farm consultant and accountant. These days we can’t burn the chequebook, but some may be deleting their online banking apps.

“Given half of what we get paid is spent locally, this will impact the towns but the cities are not immune.

“It is not all doom and gloom as we are confident the payout will progressively lift as the season unfolds. Rabobank expects the first half we’re currently in will remain flat, but some price recovery should kick in towards the end of this year and into 2015.

“I think you will find we are in a season of two-halves. The first half isn’t flash but after half time and the market equivalent of a few oranges, we’ll be back on form.

“This is not the death of dairying and nor is it anything to do with food scares either. It simply reflects a near perfect production season in Australasia, North America and Europe. It is classic supply and demand set against a world which is barely producing enough milk.

“There is also some good news coming from the beef side of dairying. Beef and veal values are up by 5.8 percent in the nine months to June. That’s off the back of good demand coming from Asia and highlights how diversified we increasingly are.

“If farmers are revising payouts to cut their cloth then political parties heading into the election ought to be revising polices the same,” Mr Hoggard concluded.

Trend in prices received for milksolids for the last 10 seasons

SeasonAverage Dairy Company total payout ($/kg milksolids)Dairy Company payout (inflation adjusted)a
2003/04$ 4.25$ 5.34
2004/05$ 4.58$ 5.60
2005/06$ 4.10$ 4.83
2006/07$ 4.46$ 5.14
2007/08$ 7.67$ 8.51
2008/09$ 5.14$ 5.59
2009/10b$ 6.37$ 6.82
2010/11b$ 7.89$ 8.02
2011/12b$ 6.40$ 6.44
2012/13b$ 6.18$ 6.18

Fonterra’s forecast milk price payout for the last (2013/14) season is $8.40 kg/MS.
Source: DairyNZ Dairy Statistics for 2012/13
a Weighted to give real dollar values using the Consumers Price Index for the end of the June quarter. Sourced from Statistics New Zealand; Excludes dairy company retentions and deduction for DairyNZ Levy.
b Average dairy co-operative payout (Fonterra, Tatua, Westland)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Myrtle Rust: Infections Found At 26 Sites

The affected properties include private gardens, plant nurseries and retailers and an orchard. The stats stand at: 21 properties in Taranaki, 3 in Northland and 2 in Waikato. More>>

Burgers To America: BurgerFuel Opens In The USA

BurgerFuel Worldwide are excited to announce the opening of their first USA based restaurant in Indianapolis, hot off the back of the Indy 500. More>>

English On Budget: Businesses Over-Egg Corporate Tax Cuts

Cutting New Zealand's 28 percent corporate tax rate is "not a panacea in the way business groups sometimes market it," says Prime Minister Bill English. More>>

ALSO:

Auckland Port To Recapture Gas: Union Calls On Ports To Stop Spewing Methyl Bromide

The Maritime Union of New Zealand welcomes the decision by Ports of Auckland to stop releasing methyl bromide emissions into the air. The move to fully recapture the toxic gas after fumigation sets a new benchmark for industry best practice. More>>

ALSO:

Retail: Banks Shoes Calls In Receiver

Banks Group, which runs 14 stores across the country under the brands including Banks Shoes and Shoe Connection, has been tipped into receivership at the request of director John Bank. More>>

ALSO: