Fonterra cuts milk price forecast

Fonterra has cut its farmgate milk price forecast for the 2015/6 season to $4.15 a kg of milksolids from a previous forecast of $4.60 a kg in response to weak international prices.

Combined with the earnings per share range of 45-55 cents, the total available for payout of $4.60-$4.70 per kg and would currently equate to a forecast cash payout of $4.50-$4.55 per kg for farmers, it said.

Chairman John Wilson said global economic conditions continue to be challenging and are impacting demand for a range of commodities, including dairy.

"Key factors driving dairy demand are declining international oil prices which have weakened the spending power of countries reliant on oil revenues, economic uncertainty in developing economies and a slow recovery of dairy imports into China," he said in a statement.

In addition, the Russian ban on European Union dairy imports continued to push more product on to the world market, Wilson said.

Hokitika-based Westland Milk Products, New Zealand's second biggest dairy co-operative after Fonterra, this week moved it forecast the 2015/16 season because of a 15 to 25 per cent fall in prices across all its commodity products. The new payout forecast is in a range of $4.15 - $4.45 per kg from a previous forecast of $4.90 to $5.30.

OpenCountry Dairy, New Zealand's second largest dairy processor after Fonterra, has already reduced its milk payout by 30c to an average price of between $4.00-$4.30 per kg milk solids.

The dairy companies forecasts' follows soft prices at last week's GlobalDairyTrade (GDT) auction, where GDT price index eased 1.4 per cent following on from a 1.6 per cent decline at the first sale of the year.

Wholemilk powder, a key product for determining Fonterra's farmgate milk price, last traded at US$2188 a tonne, well short of the US$3000 a tonne required for the previous $4.60 kg forecast to be met.

 

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