Fonterra slashes forecast milk pay out – NZD little changed

Fonterra slashes forecast milk pay out by $1.40 to $3.85/kg – NZD little changed

Fonterra has slashed its farmgate milk price pay out for the 2015/16 season by $1.40 to $3.85 per kg of Milk Solids, plus dividends $0.40-$0.50 per share. Fonterra also announced an additional $0.50 per kg support for farmers this season.

The key points are:
Cites continued significant imbalance in global dairy market
Total payout to farmers in 2015/16 season will be $4.25-$4.35 per kg
Additional support available to farmers who apply
Current prices unsustainable low
Prices beginning to impact global production levels
Reduced NZ milk volume forecast for 2015/16
Hard to call when dairy market will improve
Reduces capex by NZD$500mio to NZD$600mio from FY 2015
Will be a very difficult season for farmers if current prices continue
While the dairy industry makes up 5% of the domestic economy, it contributes 25% our exports. It is estimated that a $1 per kg drop in the milk price equates to approximately $2 billion less income for dairy farmers, with significant negative flow on affects into the regional and national economy.

This announcement reinforces the market’s view that the RBNZ will reduce interest further in the coming months.

The NZD is marginally higher in response.

The current indicative rates are:

NZDUSD 0.6540 / 0.6565
NZDEUR 0.5995 / 0.6020
NZDGBP 0.4215 / 0.4240
NZDJPY 81.65 / 81.90
NZDAUD 0.8870 / 0.8895

ends

© Scoop Media