Fonterra is dropping its milk payout forecast for the 2011-12 season by 45c, blaming a continued softness in commodity prices and a stronger New Zealand dollar.
Yesterday, the dairy giant announced a revised payout forecast of $6.70-$6.80, comprising a lower farmgate milk price of $6.30/kg milk solids, down from $6.75. The season's distributable profit range forecast of 40c-50c per share remained unchanged.
The softness of commodity prices had been reflected on Fonterra's online trading platform, Global Dairy Trade, which had experienced eight successive price falls and one uptick since May, chairman Sir Henry van der Heyden said in a statement.
Overall, the Global Dairy Trade trade weighted index was down 15.7% since May 3 when the opening forecast of $6.75/kg ms was announced.
Coupled with ongoing foreign exchange volatility and overall global economic uncertainty, the board had revised the forecast.
The opening forecast had anticipated an initial softening of international dairy prices, followed by a recovery, Sir Henry said.
"We aren't yet seeing the recovery of international dairy prices we initially anticipated and we are also dealing with a much stronger New Zealand dollar."
The board was committed to providing the best available information to farmer shareholders on a timely basis so they could plan accordingly.The forecast revision acted as a reminder to farmers to take a conservative approach with their farm budgets, he said.
