10 Dec 2015

Fonterra holds forecast payout to farmers

9:17 am on 10 December 2015

Fonterra has held its forecast payout to farmers for the current season, but is ending its loan support payments.

Fonterra chairman John Wilson

Fonterra chairman John Wilson Photo: AFP

The dairy co-operative has kept the forecast at $4.60 a kilo of milk solids.

Fonterra chair John Wilson said the market remained volatile.

He said there were signs of a recovery - particularly in China - but there was still a supply and demand imbalance.

"That imbalance is starting to reduce with year-to-date production in the United States up by only 1 percent and slowing, and New Zealand volumes expected to be down by at least 6 percent over the current season. In the EU, however, farmers are continuing to push production, currently up 1 percent."

Mr Wilson said Fonterra would stop support loans to farmers from next year.

He said the board had decided not to continue the loans for milk collected after 31 December, but would monitor conditions and decide whether to continue the support if market conditions changed later in the season.

"We will provide some $390 million in support to around 75 per cent of our farmers through the most productive half of the season, including the peak. Farms typically produce 60 per cent of their milk in the first half, with production beginning to taper off from December, so we have provided support when it is needed the most."