Westland dairy farmers will need to review their budgets.
Photo by Gerard O'Brien.
Farmers will be ''definitely asking questions'' following
Westland Milk Products' decision to cut its forecast payout by
60c for the 2014-15 season.
The $5.40-$5.80 range, before retentions, was down from
$6-$6.40 announced in July and was in response to the
conditions all New Zealand dairy companies were experiencing,
chief executive Rod Quin said yesterday.
Earlier this week, Fonterra maintained its forecast farm-gate
milk price at $6, which, with an estimated dividend range of
20c-25c per share, which meant a forecast cash payout for the
season of $6.20-$6.25.
Given Fonterra's hold on its forecast, Westland's
announcement was not exactly the best news to go into spring
with, Federated Farmers West Coast dairy chairwoman Renee
Farmer-shareholders of the West Coast dairy co-operative
would be watching spending very closely, she said.
''The fact the world produced seven billion litres of milk
for export in the first half of 2014 isn't a secret and
hasn't happened overnight, so this further revision is
disappointing. It is going to mean some serious
belt-tightening on the West Coast,'' she said.
The priority for farmers would be to redo budgets and
cashflow. It also meant talking to farm advisers and bankers,
The West Coast team at Federated Farmers was available to
talk to, along with the Rural Support Trust, if farmers
''Given this is one hell of a drop in less than a month, I
think we need to ask if Westland had its glass over
'' Like anyone, we don't like bad news, but it's better to
get that news early than be led down the garden path,'' she
Westland's reduction was driven by falls in global prices and
the continued high value of the New Zealand dollar, Mr Quin
said in a statement.
While last week's GlobalDairyTrade auction saw an overall
price drop of just 0.6%, the skim milk powder price, which
represented a ''substantial'' proportion of Westland's
production, dropped 12%.
There was still lacklustre demand from China and stock levels
in distributor and customer warehouses were reportedly high,
Mr Quin said.
The reduced payout would cause farmers to review their
budgets and both Westland's board and management were very
conscious of the stress it would put on some suppliers, he
The company would continue its strategy to increase its
capacity to produce higher-value nutritional products, such
as infant formula.
A recently announced investment in a $102 million
nutritionals drier at Hokitika would give the capacity to
shift more of its production to that end of the market, where
profits were higher and opportunities to lift payouts were
better, he said.