23 May 2012

Dairy farmers urged to trim budgets

6:31 am on 23 May 2012

Dairy industry and farming organisations are calling on dairy farmers to budget wisely as their projected milk cheques and dividends take a hit in Fonterra's forecasts for reduced milk payouts.

The co-operative has announced a 30 cents reduction in its forecast farm gate milk price for the current season to $6.05 per kg of milk solids.

It's made no change to the expected profit dividend on top of the milk payout, which stays at 40-50 cents a share.

But Fonterra has also announced a lower opening milk price for the new season, starting next month, of $5.50 per kg.

Chairman Sir Henry van der Heyden says the 30 cents drop in this season's milk price is probably greater than farmers were expecting, but reflects a continuing fall in commodity dairy prices, due to higher milk production.

He says it's hard to predict when dairy prices may recover.

Similarly, Federated Farmers is warning farmers to budget conservatively.

Dairy chair Willy Leferink says the latest milk price drop is the second payout reduction Fonterra has made in just over two months.

He says Westland Milk Products has also revised its current season forecast payout range down 30 cents to between $6.30 - $6.60 per kg.

He advises farmers to prepare two budgets for the next season: one in the low $5/kg range and the other in the mid-to-upper $5.50/kg range.

Dairy NZ chief executive Tim Mackle says that after a good season farmers will need to adjust by looking at how they can wind back their costs.