Fonterra Revises Payout Forcast For 2011/12 Season

NEW ZEALAND - Fonterra has announced a revised payout forecast for the 2011/12 season of $6.70-$6.80 for a fully shared up farmer, 45 cents lower than the opening payout forecast announced in May.
calendar icon 26 October 2011
clock icon 2 minute read

The revised forecast comprises a lower Fonterra Farmgate Milk Price of $6.30 per kg milksolids, down from $6.75. The season's Distributable Profit range forecast of 40-50 cents per share remains unchanged.

Fonterra Chairman Sir Henry van der Heyden said the lower Farmgate Milk Price forecast reflected a continued softness in commodity prices and a stronger New Zealand dollar.

"This softness of commodity prices has been reflected on Fonterra's online trading platform Global Dairy Trade (GDT), which has experienced eight successive price falls and one uptick since May", said Sir Henry.

Overall, the GDT-Trade Weighted Index is down 15.7 per cent since 3 May when the opening forecast of $6.75 per kgMS was announced.

Coupled with ongoing foreign exchange volatility and overall global economic uncertainty, the Board had revised down the Fonterra Farmgate Milk Price forecast.

Sir Henry said the opening forecast had anticipated an initial softening of international dairy prices, followed by a recovery.

"We aren't yet seeing the recovery of international dairy prices we initially anticipated and we are also dealing with a much stronger New Zealand dollar.

"Higher prices often lead to increased supply into global markets from our global competitors, as well as reduced demand. We are seeing this and it is impacting prices."

Sir Henry said the Board was committed to providing the best available information to farmer shareholders on a timely basis so they can plan accordingly. The forecast revision acted as a reminder to farmers to take a conservative approach with their farm budgets.

On the positive side, Sir Henry said there had been a strong start to the season. A long stretch of favourable weather in New Zealand had boosted pasture growth and contributed to record milk flows across the main dairying regions.

Federated Farmers commented that Fonterra’s decision to revise down it’s payout is unfortunate, but thanks the cooperative for being upfront about the situation and giving its farmers plenty of warning.

“Farmers were told a couple of weeks ago to expect a downgrade in the payout forecast due to weakened global commodity price trends at the moment,” Federated Farmers Dairy chairman Willy Leferink says.

“While it is a blow for dairy farmers, they have seen this happen before and will be prepared to weather any economic turbulence. As well as being warned by Fonterra, they will have been watching the strong New Zealand dollar and the lower results on the globalDairyTrade auction and will have adjusted their spending accordingly.

“The good news is that the longer term out look for dairy remains strong and Fonterra’s profit forecasts for this year remain safe,” Mr Leferink concluded.

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