Fonterra is suspending the 5c differential between its
share-backed and non-share-backed farm-gate milk price for
That decision, announced yesterday, meant farmers would not
be required to immediately increase their shareholding to
cover increased milk production at the end of the season.
Instead, they would do so based on the new rolling
three-season average share standard which will come into
effect from June 1 next year.
Chairman Henry van der Heyden described it as a
''common-sense solution'' that would simplify farmers'
business decisions between now and June. It would ease the
transition into the introduction of the three-season rolling
Earlier this year, the board decided on a 5c difference in
the farm-gate milk price for share-backed and non-share
Milk production this season had since been higher than
originally forecast and some farmer shareholders were
considering adding to their shareholding now, to gain the
benefit of the full milk price, Sir Henry said.
The board made the decision to suspend the differential
because it ''made no sense'' to encourage farmers to acquire
additional shares in that period.
''Instead, this decision sends a strong signal to our farmer
shareholders that they should not feel any pressure to
purchase shares to back all their production this season,''
Dairy prices took a breather in this week's GlobalDairyTrade
auction, falling 2% on a trade-weighted basis.
Whole milk powder led the decrease with a 3.5% fall, while
skim milk powder and cheddar also recorded declines, down 1%
and 2.4% respectively. Anhydrous milk fat lifted 3.7%.
This week's fall was the first since the October 2 auction
and, overall, dairy prices had increased by 27% since May,
Westpac economist Nathan Penny said.
Fonterra will be applying for consents to build a new milk
powder plant at its Pahiatua site to process an additional
2.5 million litres each day.
The proposal for a third drier would help ease peak
processing pressure in the lower North Island, Fonterra
director New Zealand operations Brent Taylor said.
The co-operative's two driers at Pahiatua were already
running at capacity, processing 1.4 million litres a day, and
for the past 12 years, at least 1.6 million litres a day had
been sent by rail to the Whareroa site for processing.