24 Sep 2014

Farmers wait for final milk payout

8:52 am on 24 September 2014

Dairy farmers are waiting to hear what Fonterra will tell them today when it announces its financial results for the past year.

New Zealand's biggest dairy processor and exporter will be confirming its final milk payout for the past 2013-14 season.

fonterra milk truck crossing Balclutha bridge

Some commentators believe Fonterra will have to lower prices further. Photo: PHOTO NZ

That is currently sitting at a record $8.40 per kilo of milk solids, but it is also expected to drop its forecast payout for this season again.

Fonterra has already lowered its opening forecast for the current season from $7 to $6 a kilo, with a 20 to 25 cents a share dividend on top of that.

But with the slump in international dairy commodity prices in recent weeks, some commentators are predicting that Fonterra may have to bring its milk price down to near $5 per kilo.

That sort of prediction has been given added weight this week, with Canterbury dairy company Synlait Milk dropping its forecast milk price from $7 to $5.

The second biggest dairy processor, Open Country, is forecasting a price ranging from $5.10 to $5.30.

Westland Milk Products co-operative recently reduced its milk payout forecast to between $5.40 and $5.80.

Fonterra suppliers will be expecting a revised price that sits somewhere between $5 and $6.

Confidence takes a hit - survey

The plunging international dairy prices and milk payouts have hit farmer confidence for six. That shows up in Rabobank's latest rural confidence survey, which puts farmer optimism at its lowest level in two years.

Rabobank's regional manager for Waikato and The King Country, Paul Lamont, says the quarterly survey coincided with one of the recent global dairy trade auctions when prices fell by 6 percent and that was probably on the minds of dairy farmers in particular.

"Thirty-seven percent of farmers have a negative outlook for the economy for the next 12 months, compared with 24 percent at the previous survey. And those with a positive view decreased from 25 to 20 percent at the last survey," he says.

"But there was a widening disparity between dairy farmers and sheep and beef farmers. Sheep and beef farmers lost a bit of confidence - but nowhere near as much as the dairy farmers, and probably with good reason. The outlook for both sheep and lamb are looking better than at the same time last year."

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