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

 

Gordon Campbell: On Tiwai Point (And Saying “No” In Greece)

Its hard to see how Rio Tinto’s one month delay in announcing its intentions about the Tiwai Point aluminium smelter is a good sign for (a) the jobs of the workers affected or (b) for the New Zealand taxpayer. More>>

ALSO:

Half Empty: Dairy Product Prices Extend Slide To Six-Year Low

Dairy product prices continued their slide, paced by whole milk power, in the latest GlobalDairyTrade auction, weakening to the lowest level in six years. More>>

ALSO:

Copper Broadband: Regulator Set To Keep Chorus Pricing Largely Unchanged

The Commerce Commission looks likely to settle on a price close to its original decision on what telecommunications network operator Chorus can charge its customers, though it probably won’t backdate any update. More>>

ALSO:

Lower Levy For Safer Cars: ACC Backtracks On Safety Assessments

Dog and Lemon: “The ACC has based the entire levy system on a set of badly flawed data from Monash University. This Monash data is riddled with errors and false assumptions; that’s the real reason for the multiple mistakes in setting ACC levies.” More>>

ALSO:

Fast Track: TPP Negotiations Set To Accelerate, Groser Says

Negotiations for the Trans-Pacific Partnership will accelerate in July, with New Zealand officials working to stitch up a deal by the month's end, according to Trade Minister Tim Groser. More>>

ALSO:

Floods: Initial Assessment Of Economic Impact

Authorities around the region have compiled an initial impact assessment for the Ministry of Civil Defence, putting the estimated cost of flood recovery at around $120 million... this early estimate includes social, built, and economic costs to business, but doesn’t include costs to the rural sector. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news