Good news from Westland

Wst Coast dairy farmers have received some good news after Westland Milk Products predicted a $5.60-$6 payout for the 2015-16 season.

While chief executive Rod Quin acknowledged it might be more optimistic than some in the dairy industry, it was the co-operative's ''considered'' forecast of the expected outcomes for the approaching season.

The company's increasing move into nutritional products was also a factor in its higher predictions.

Dairy giant Fonterra is expected to announce its new season milk price forecast today and it is tipped to be about $5.

Westland, which is New Zealand's second-largest dairy co-operative, has retained its 2014-15 payout at $4.90-$5.10 before retentions.

While dairy prices were expected to recover as the 2015-16 season progressed, they were also expected to remain relatively low, due to ongoing milk supply pressure from the United States and the European Union, Mr Quin said.

One bright spot was the Chinese whole milk powder buyers, who were expected to return with more demand early next year.

The industry was in ''uncharted territory'' with at least three major changes impacting global dynamics.

They included the removal of EU milk quotas, ongoing sanctions against Russia and lower demand from China.

Westland would begin the 2015-16 season with a higher-than-usual advance payout of $4.40kg/ms, versus a traditional approach of $3.85.

That was based on the expected need for cash required on farms to keep milk production as high as possible, while the company had robust cash flows and manageable working capital headroom, Mr Quin said.

Westpac economist Michael Gordon said yesterday there would be ''intense'' market interest in Fonterra's initial forecast, after last season's payment fell to $4.50, the lowest in eight years.

He believed it would be on a ''best efforts'' basis. Some had suggested the co-operative would start with a conservative forecast, leaving room for ''upside surprises'' later in the forecast.

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