Synlait payout a good news/bad news story

Synlait payout a good news/bad news story

Synlait’s confirmation of a total payout of $8.31 per kilogram of milk solids (kg/MS), for the 2013/14 season, starts the ball rolling for company and cooperative results this week, with the company dropping its 2014/15 season forecast to $5 kg/MS from $7.

“It feels a bit like, ‘we’ve got good news and bad news…what do you want first?’ says Andrew Hoggard, Federated Farmers Dairy chairperson.

“Our Synlait members will be very happy with a base milk price of $8.27 kg/MS and special milk payments on top worth four cents taking the total to $8.31 kg/MS.

“What will see a gulp is the in-season revised forecast of $5 kg/MS. It will put the cat among the pigeons ahead of Fonterra Cooperative Group’s results on Wednesday.

“Yet since most farmers do not operate season to season, averaging last season with the current in-season forecast, means the average is more like $6.65 kg/MS.

“It may not the best for the two seasons combined but it’s not milk and disaster either.

“The global market has been well telegraphed to farmers so it’s not like when the global financial crisis struck. The world has enjoyed bumper milk production everywhere and just as we worked through that, international events have thrown a spanner into the works.

“The global milk market may be dislocated but we can be thankful there are no milk powder lakes or butter mountains anymore. GlobalDairyTrade also means there is price transparency everywhere.

“New Zealand farmers have an ace up our sleeve called pasture but our other ace, the dollar, isn’t giving us anywhere like the relief we’d like.

“High input farmers in North America and Europe do not have the same financial freeboard as we do. A bit like the America’s Cup, Kiwi farmers can live in the international markets ‘bad air’ longer than they can, but we are no longer a low cost producer.

“It is going to hurt and the guys with even low production costs are going to have to take a razor to their budgets. Cash flow this season has been decimated and there’s no room for passengers in the herd. Your glass, simply put, cannot be half full.

“It may take two seasons for international prices to settle, so budget on the worst case not the best,” Mr Hoggard concluded.

ends

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