Fonterra's decision to hold its forecast farm-gate milk price
for the 2014-15 season at $6 reflects the longer-term outlook
for international dairy prices, chairman John Wilson says.
Last month, the co-operative slashed its forecast from $7 to
$6, following continued falls in prices which had been
affected by strong global production, softer demand and
inventory build-up in China.
With a previously announced estimated dividend range of
20c-25c per share, that meant a forecast cash payout for the
season of $6.20-$6.25.
Current market views, supported by Fonterra's own
forecasting, indicated commodity prices improving later this
year or in early 2015 and global demand continuing to grow
year-on-year, Mr Wilson said.
While the long-term market fundamentals remained sound, the
current market conditions were difficult and there remained
further down-side risk.
''There is still volatility. This reflects challenges with
supply and demand following a good dairy season globally.
Given these factors, the forecast is our best judgement at
this time,'' he said.
It was early in the season and it was important farmers
continued exercising caution over their farming business
Fonterra Shareholders Council chairman Ian Brown said farmers
would be relieved with the announcement but stressed the
importance of continued prudent financial planning.
Westpac senior economist Anne Boniface said the bank was
maintaining its own forecast of a $5.80 milk price, which
effectively incorporated some of the down-side risk alluded
to by Fonterra.
Federated Farmers dairy chairman Andrew Hoggard said the milk
price hold was good news, given there had been widespread
speculation about it sliding below the $6 mark.
However, they were ''not out of the woods yet'' and farmers
should budget in the mid-$5 payout range, he said.
An update on business performance would be provided when
Fonterra announced its annual result on September 24.