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

 

Fonterra expected to meet its forecast payout

Fonterra expected to meet its forecast payout as lower production boosts prices

By Tina Morrison

Nov. 4 (BusinessDesk) - Fonterra Cooperative Group, the world's largest dairy exporter, is expected to be able to meet its forecast payout to farmers for this season even after dairy prices fell at a second consecutive auction.

Average prices fell 7.4 percent at last night's GlobalDairyTrade auction, following a 3.1 percent decline the previous auction, which snapped four consecutive gains.

Auckland-based Fonterra, owned by about 10,500 farmers, has said it expects to pay its local producers $4.60 per kilogram of milk solids for the 2015/16 season. Analysts are betting Fonterra will be able to meet or exceed that forecast, according to a BusinessDesk survey taken after the latest auction result. Expectations range from $4.25/kgMS to $5.30/kgMS with all but one of the six analysts forecasting a higher payout than Fonterra's current expectation. The cooperative is due to review its forecast by early December as part of government regulations.

Dairy prices were down across all of the products on offer at the latest auction, and some contracts didn't trade amid lacklustre demand with the auction lasting only about 90 minutes, the shortest period in five years. Still, even though NZX whole milk powder futures have declined further in trading on the NZX today, analysts are betting that lower production from New Zealand, which accounts for about a third of global dairy exports and the lion's share of whole milk powder, will start to bite later in the season, pushing up prices.

"Markets anticipate other producers can offset NZ declines," said ASB Bank rural economist Nathan Penny, who expects the nation's production to fall 6 percent this season, the biggest drop since 1999. "We think this market assumption is misplaced - lost NZ exports are too big to cover. The EU and others cannot fill the NZ hole."

New Zealand milk production hit its seasonal peak last month and lower cow numbers and the prospect of an El Nino drought crimping production means there is little prospect of making up lost ground later in the season, analysts said.

"With that in mind and as markets discover that milk is thin on the ground over coming months, we expect prices to regain the lost ground from the last two auctions," said the ASB's Penny. "Despite the recent falls, we continue to expect dairy auction prices will rise over the course of the 2015/16 season."

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Government: Delivering Lower Card Fees To Business

Commerce and Consumer Affairs Minister David Clark has today announced the Government’s next steps to reduce merchant service fees, that banks charge businesses when customers use a credit or debit card to pay, which is estimated to save New Zealand businesses ... More>>

SEEK NZ Employment Report: April 2021

OVERVIEW OF APRIL 2021: STATE OF THE NATION: April, for the second consecutive month, saw the highest number of jobs ever advertised on seek.co.nz. Applications per job ad fell 9% month-on-month (m/m). SEEK job ads were up by 12% m/m. SEEK job ads were ... More>>

Commerce Commission: Warns Genesis Over Business Billing Errors

The Commerce Commission has issued a warning to Genesis Energy Limited about billing errors concerning electricity line charges to business customers. Genesis reported the errors to the Commission. The Commission considers that Genesis is likely to ... More>>

Stats: Lower Job Security Linked To Lower Life Satisfaction

People who feel their employment is insecure are more likely than other employed people to rate their overall life satisfaction poorly, Stats NZ said today. New survey data from the March 2021 quarter shows that 26 percent of employed people who thought ... More>>

The Conversation: The Outlook For Coral Reefs Remains Grim Unless We Cut Emissions Fast — New Research

A study of 183 coral reefs worldwide quantified the impacts of ocean warming and acidification on reef growth rates. Even under the lowest emissions scenarios, the future of reefs is not bright. More>>

The Conversation: Why Now Would Be A Good Time For The Reserve Bank Of New Zealand To Publish Stress Test Results For Individual Banks

Set against the backdrop of an economy healing from 2020’s annus horribilis , this week’s Financial Stability Report (FSR) from the Reserve Bank (RBNZ) was cautiously reassuring: the country’s financial system is sound, though vulnerabilities remain. More>>