Fonterra’s 2013/14 “wow” on 2012/13 results day

25 September 2013

Fonterra’s 2013/14 “wow” on 2012/13 results day

Federated Farmers Dairy is gob-smacked by Fonterra Cooperative Group increasing its Forecast Farmgate Milk Price for the 2013/2014 season to $8.30 per kilogram of Milk Solids (kg/MS).

“Absolutely amazing,” says Andrew Hoggard, Federated Farmers Dairy vice-chairperson

“If it sticks, we will be looking at a record payout because when combined with the dividend, it trumps 2007/8 when that payout is adjusted for inflation.

“Of course the payout is just like the current America’s Cup. We may have one hand on the Auld Mug with this forecast payout but then we have to win and that’s easier said than done. For farmers, that means winning over the next 12-months.

“As we are seeing from San Francisco anything can happen. You cannot take anything for granted.

“High milk prices for farmers become a doubled-edged sword for the performance of Fonterra the company. Yet with it we can dream a little for what uses Fonterra supplier-shareholders could put a total forecast cash payout of $8.62 kg/MS to.

“The public need to remember that this is a forecast and not a foregone conclusion.

“Debt retirement must be high on the agenda especially for North Island farmers after the drought. Paying down debt is the easiest way to win financial freeboard.

“With a high payout comes responsibility to use that money wisely. While debt is number one, the farm environment runs a close second. Things like riparian management and technologically-led nutrient management systems will pay you back. As is looking into on-farm resilience for things like water and basic services like electricity.

“But right now, we need to farm and that means basing farm budgets on this season’s more sanguine milk price payout confirmed at $5.84 kg/MS and with a dividend of 32 cents per share on top.

“While yesterday we felt there would be no surprises in the 2012/13 results, we are pleased to see the farmgate milk price upped four cents to $5.84 kg/MS. It is a very good way to close out a tough season.

“For many farmers, the 2012/13 payout now means they’ll be able to make a small financial surplus. I really do need to emphasise the word small with both the milkprice and the dividend being close to farm operating costs.

“If you look back at the payout history since 2001, it has not been a metronome but reflects the reality of being an exporter. As farmers, we need to take the gains when we get them to extend farm performance in the good years to be better set up for when the lean years hit.

“At least 2013/14 will put us into clear-air. Farmers have the good sense to know it will not last forever. That though doesn’t stop the warm feeling many have as they go about their jobs on farm today,” Mr Hoggard concluded.

ENDS

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