NEW ZEALAND - Falling world milk prices have led to Fonterra lowering its farmgate milk price for the coming season by 70 cents.
Fonterra chairman John Wilson said the review, which takes the 2014/15 season price from NZ$6 to $5.30, reflects market volatility.
He added that the Global Dairy Trade has declined 6 per cent over the last two trades.
Summarising the economic and trade picture, he said: “The market is currently influenced by strong milk production globally, the impact of Russia’s ban on the importation of dairy products, and the levels of inventory in China.
"Some relief has been provided by exchange rates, with the NZ dollar recently showing some signs of falling against the US dollar.
“Under the current market conditions, there is further downside risk. However, the forecast reflects expectations that prices will increase in the medium term.”
Fonterra has also 'increased and widened' its dividend range from 20-25 cents per share to 25-35 cents, amounting to a prospective cash payout of NZ$5.55-5.65.
Chief Executive Theo Spierings said the estimated dividend range reflected the positive impact of a lower forecast Farmgate Milk Price on product margins but also significant volatility in commodity prices.
“A lower forecast Farmgate Milk Price reduces input costs in our consumer and foodservice businesses," said Mr Spierings.
"In turn, we do expect to deliver increased returns as a result of a recovery in margins on our products."
TheCattleSite News Desk
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