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


Fonterra cuts Australian farmgate milk price, offers loans

Fonterra cuts Australian farmgate milk price, offers loan to farmers

By Tina Morrison

May 5 (BusinessDesk) - Fonterra Cooperative Group cut its forecast farmgate milk price to its Australian dairy farmers for the current season, saying it better reflects the oversupply of milk which is weighing on global dairy commodity prices. It also offered farmers a loan linked to future supply.

The dairy processor will pay its Australian farmers A$5 per kilogram of milk solids, down from an earlier forecast of A$5.60/kgMS, the Auckland-based company said in a statement. It also offered its Australian suppliers an interest-bearing support loan of as much as 60 cents/kgMS, linked to a supply commitment and repayable from its 2018 financial year.

"The price change better reflects the reality of the supply and demand imbalance that is affecting global dairy commodity prices, compounded by the recent strength of the Australian dollar," it said.

Fonterra, New Zealand's dominant milk processor, is reducing payments to its farmer suppliers as it grapples with weak dairy prices which have remained lower for longer than expected as global supply continues to exceed demand. It has already reduced payments to its New Zealand suppliers to $3.90/kgMS for the current season, which is below the cost of production for most. It has supported its cash-strapped farmers with an interest-free loan scheme that cost it $390 million and stretched its balance sheet, and has brought forward payment of its final dividend to get money into farmers' hands as quickly as possible.

The company said today that its revised Australian milk price would reduce the cost of goods sold for Fonterra Australia by about A$48 million, although the final amount is subject to factors such as final milk volumes for the year.

"This will contribute to the reduction of operating losses in our Australian Ingredients business this financial year," it said. The move follows last week's sudden resignation by the chief executive of a competitor coop, Murray Goulburn, and a cut in its promised payout to farmers from A$6/kgMS to A$4.75 to A$5/kgMS.

Australian operations have been under-performing for some time, prompting a turnaround plan, which included the sale of Fonterra's stake in Bega Cheese, a deal with Bellamy's Australia to make infant formula, and the merger of New Zealand's consumer brands with the Australian segment under the purview of Oceania managing director Judith Swales.

Fonterra maintained its current earnings guidance range of 45 cents to 55 cents per share.

Units of the Fonterra Shareholders' Fund slid 0.2 percent to $5.79, and have decreased 3.2 percent this year.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Commerce Commission: Mercury Cleared To Acquire Trustpower’s Retail Business

The Commerce Commission has granted clearance for Mercury NZ Limited to acquire Trustpower Limited’s retail business. Deputy Chair Sue Begg said the Commission is satisfied that the acquisition is unlikely to substantially lessen competition in any New Zealand market.... More>>

Consumer NZ: Buy-now, Pay-later Raking In $10m+ In Late Fees Annually

A Consumer NZ survey has found buy-now, pay-later services are costing shoppers more than $10 million a year in late fees. Close to four out of 10 Kiwi consumers use buy-now, pay-later services, such as Afterpay, Laybuy and Zip... More>>

Westpac: Catherine Mcgrath Appointed New Zealand CEO

Westpac Group CEO Peter King and the Westpac New Zealand Board today announced the appointment of Catherine McGrath as Chief Executive Officer, Westpac New Zealand... More>>

Statistics: Surge In Imports Results In Record Monthly Trade Deficit
Imports increased $1.8 billion in August 2021 compared with August 2020, resulting in a record monthly trade deficit of $2.1 billion, Stats NZ said today. Exports were little changed, down $42 million. "This is a larger deficit than normal because of higher values for imports.. More>>

Fonterra: Completes reset, announces annual results and long-term growth plan out to 2030

Fonterra Co-operative Group Limited today announced a strong set of results for the 2021 financial year, reflected in a final Farmgate Milk Price of $7.54, normalised earnings per share of 34 cents and a final dividend of 15 cents... More>>

Statistics: GDP rises in the June 2021 quarter

Gross domestic product (GDP) rose by 2.8 percent in the June 2021 quarter, following a 1.4 percent increase in the March 2021 quarter, Stats NZ said today. June 2021 quarter GDP was 4.3 percent higher when compared with the December 2019 quarter... More>>