Westland suppliers get some bad news

Westland dairy farmers will need to review their budgets. Photo by Gerard O'Brien.
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 Rooney said.

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, she said.

The West Coast team at Federated Farmers was available to talk to, along with the Rural Support Trust, if farmers needed help.

''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 half-full.

'' 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 said.

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 said.

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.

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