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Fonterra and Synlait results look grim

25 March 2015

Fonterra and Synlait results look grim

Following today’s announcements from Synlait and Fonterra, Federated Farmers is urging dairy farmers to keep their budgets tight.

“Farmers were hoping for some good news, but today’s announcement enforces the need to maintain their frugal mindset,” says Andrew Hoggard, Federated Farmers Dairy Chair.

“The worst is not over yet, with farmers going into winter with the lower payouts starting to take affect and the drought affected regions, meaning farmers will be needing to buy in more supplementary feed than usual.”

“What will be the biggest disappointment to farmers today is Fonterra’s drop in its dividend. The dividend's role is to reflect the value in Fonterra’s value add products. The belief amongst farmers has been that a low farmgate milk price would then reduce the cost of producing value add products which would be reflected in a higher dividend returned to farmers.”

“Obviously today's result shows that this isn’t the case, but Fonterra will need to explain that well, and clearly, to their shareholder farmers.”

“There’s not a lot of money in the system this year so the five cent drop in the dividend is going to hurt. All farmers can do now is sit tight, plan ahead and budget well.”

“Part of the story we’ve heard today is that there has been an oversupply in the market place. The feeling from Fonterra is that the market signals should correct this at some stage. However part of the challenge in this space is that a lot of dairy farmers around the world are insulated against the market signals through trade barriers and market protections. This is why meaningful progress in the TPP is important to not only the New Zealand dairy industry but our mates across the ditch.”

“The bronze lining is that at least Synlait farmers forecast payout is now not looking as grim and they are now experiencing a similar level of pain to Fonterra suppliers.”

Andrew finished by saying to farmers “Remember this is a forecast not a reality.”

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