Dairy payout of $5.70 for 2012 forecast

Willy Leferink.
Willy Leferink.
Westpac economists are calculating a total dairy payout of $5.70 for 2012, while industry leaders say the year is shaping up as a "bumpy one" internationally.

The lower payout combined with a return to more normal weather conditions meant 2012-13 would be a more challenging year for dairy farmers, Westpac economist Anne Boniface said.

But the bank believed many would be well placed to meet those challenges. The lower payout came on the heels of several "pretty good" years, a period of debt consolidation and with many farmers starting the 2012-13 season with both stock and pasture in excellent condition.

She anticipated dairy prices would start to recover as global demand picked up and supply conditions normalised, and the payout was likely to improve in 2013-14.

In May, Fonterra announced it had revised down its 2011-12 forecast payout range before retentions to $6.45-$6.55, citing the continued softening of commodity prices.

It also announced a lower opening forecast payout range for the 2012-13 season before retentions of $5.95-$6.05, reflecting an outlook of higher dairy production around the world pushing down world dairy prices.

Federated Farmers dairy chairman Willy Leferink said the year was shaping up as a "bumpy one" , with drought in the United States and thousands of European dairy farmers taking to the streets in protest over low prices.

"We seem to be staring down the barrel of a global dairy crisis, which could benefit New Zealand's dairy farmers.

"Before the drought struck, US dairy production growth was slowing "but the brakes will be fully on now".

Mr Leferink heard estimates the US Department of Agriculture's modest 0.2% growth forecast might turn into a 2% fall.

"It is fair to say the 2012-13 season is looking tough everywhere, plus we have a monkey on our back called the high Kiwi dollar," he said.

The final few weeks of trials are under way with the 60-strong workforce at Fonterra's new drier factory at Darfield, before the first milk arrives.

Fifty more positions would be added next year when the site's second drier came on line. When both were fully operational, the site would process up to 6.6 million litres of milk a day.

Fonterra manufacturing sites throughout the country were also in the final stages of a $100 million maintenance upgrade, in preparation for the new season.

 

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