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

 

Planes: Jetstar Launches Regional Network

Jetstar, the Qantas Airways budget offshoot, launched its new regional network in New Zealand with special $9 one-way fares and has narrowed down its choices to five routes and four destinations - Nelson, Napier, New Plymouth, and Palmerston North. More>>

ALSO:

Fisheries: Report On Underrsize Snapper Catch

The report found that commercial fishers caught 144 tonnes of undersized snapper in the Snapper 1 area – about 3% of the total commercial catch – in the year ending February 2015. The area stretches from the top of the North Island to the Bay of Plenty and is one of New Zealand’s most important fisheries. More>>

ALSO:

Tourism: China Southern Airlines To Fly To Christchurch

China Southern Airlines, in partnership with Christchurch Airport and the South Island tourism industry, has announced today it will begin flying directly between Guangzhou, Mainland China and the South Island. More>>

ALSO:

Dodgy: Truck Shops Come Under Scrutiny

Mobile traders, or truck shops, target poorer communities, particularly in Auckland, with non-compliant contracts, steep prices and often lower-quality goods than can be bought at ordinary shops, a Commerce Commission investigation has found. More>>

ALSO:

Auckland Transport: Government, Council Agree On Funding Approach

The government and Auckland Council have reached a detente over transport funding, establishing a one-year, collaborative timetable for decisions on funding for the city's transport infrastructure growth in the next 30 years after the government refused to fund the $2 billion of short and medium-term plans outlined in Auckland's draft Unitary Plan. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news