Henry van der Heyden.
Christmas has come early for Fonterra farmer shareholders
with the dairy giant lifting its 2012-13 season payout forecast
range by 25c to $5.90-$6.
Yesterday, the co-operative's board announced a higher
forecast farmgate milk price of $5.50 kg/ms, up from $5.25 on
the previous forecast and a forecast net profit after tax
range of 40c-50c a share, consistent with the recent Fonterra
Shareholders' Fund Offer prospectus.
It also announced a 40% increase in advance rate payments to
farmer shareholders, which meant farmers would have more
money flowing into their bank accounts from late January when
they were paid for the previous month, which would help with
cash flows, chairman Sir Henry van der Heyden said.
That decision was made after considering farmer shareholders'
cash-flow requirements, and the strength of the
co-operative's balance sheet after the launch of Trading
Among Farmers late last month. The units debuted at $6.66 to
a flurry of interest, up $1.16 on their listing price of
$5.50, and reached a high of $6.95.
Yesterday afternoon, they were trading at $6.63.
Federated Farmers dairy chairman Willy Leferink described the
upwards revision as a ''huge relief'', putting ''clearer
air'' between farmers' costs and projected revenue. However,
he warned against confusing revenue with profit.
''This expected revision is welcome and is great for morale
before Christmas but it will not set the tills alight,'' he
Fonterra chief executive Theo Spierings said the strong
balance sheet meant it was in a position to increase payments
to farmers over the next few months without any significant
risk to its financial stability.
Given global conditions, the co-operative's forecasting
anticipated global dairy prices were likely to move higher in
the first half of 2013, Mr Spierings said.
While the outlook for any movements in the New Zealand dollar
exchange rate were neutral, the impact of weather events in
other markets was likely to support the lift in forecast
farmgate milk price.
''There has been a persistent, serious drought in the United
States. That has pushed up the price of grain, which in turn
affects dairy production.
''There are also concerns about drought in the Ukraine and
Russia. In South America, extreme wetness in parts of Brazil
and Argentina could also depress wheat production,'' he said.
BNZ economists also anticipated some world dairy price
improvement in 2013 as slower growth in New Zealand and
particularly global milk production met solid demand. An
improving world economy, or at least diminishing downside
growth risks, would help support demand, the bank's latest
rural wrap said.