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

 

Half Full: Dairy Payouts Steady, Cash Will Be Tight

Industry body DairyNZ is advising farmers to focus on strong cashflow management as they look ahead to the 2015-16 season following Fonterra's half-year results announcement today. More>>

ALSO:

First Union: Cotton On Plans To Use “Tea Break” Law

“The Prime Minister reassured New Zealanders that ‘post the passing of this law, will you all of a sudden find thousands of workers who are denied having a tea break? The answer is absolutely not’... Cotton On is proposing to remove tea and meal breaks for workers in its safety sensitive distribution centre. How long before other major chains try and follow suit?” More>>

ALSO:

Scoop Business: NZ-Korea FTA Signed Amid Spying, Lost Sovereignty Claims

A long-awaited free trade agreement between New Zealand and South Korea has been signed in Seoul by Prime Minister John Key and the Korean president, Park Geun-hye. More>>

ALSO:

PM Visit: NZ And Viet Nam Agree Ambitious Trade Target

New Zealand and Viet Nam have agreed an ambitious target of doubling two-way goods and service trade to around $2.2 billion by 2020, Prime Minister John Key has announced. More>>

ALSO:

Scoop Business: NZ Economy Grows 0.8% In Fourth Quarter

The New Zealand economy expanded in the fourth quarter as tourists drove growth in retailing and accommodation, and property sales increased demand for real estate services. More>>

ALSO:

Scoop Business: RBNZ’s Wheeler Keeps OCR On Hold, No Rate Hikes Ahead

The Reserve Bank has removed the prospect of future interest rate hikes from its forecast horizon as a strong kiwi dollar and cheap oil hold down inflation, and the central bank ponders whether to lower its assessment of where “neutral” interest rates should be. The kiwi dollar gained. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news