Hard on the heals of its August 4 cut, Fonterra has cut its new season payout forecast again, down -$0.25/kgMS from a midpoint of $7.00/kgMS to $6.75/kg/MS.
This comes just days after the last Global Dairy Trade auction saw whole milk powder (WMP) prices fall another -7.4% with the WMP price diving -10.9%.
Fonterra is scheduled to release its FY20223 annual results on September 21, and its annual meeting on November 9.
Softening the blow for dairy farmers is the imminent capital return payout after its broad divestment program, which happens today. And the co-operative has signaled that its earnings will be at the top of its previously advised range, and that should result in a higher dividend payout this year.
Here is the Statement from Fonterra.
Fonterra Co-operative Group has today reduced its 2023/24 season forecast Farmgate Milk Price range from $6.25 - $7.75 per kgMS, with a midpoint of $7.00 per kgMS, to $6.00 - $7.50 per kgMS with a midpoint of $6.75 per kgMS.
Fonterra CEO Miles Hurrell says Global Dairy Trade (GDT) prices have continued to fall since it revised its Farmgate Milk Price earlier this month, requiring the Co-op to reduce its midpoint by a further 25 cents.
“GDT prices have fallen sharply since we released our opening forecast for the season in May, with the overall index down 16% over that period.
“While our wide forecast range assumed movement in GDT prices, whole milk powder prices fell 10.9% in the most recent trading event requiring us to revise our position again.
“Reduced demand from key importing regions for whole milk powder is continuing to weigh on prices. While indications are demand will start to return over the second half of FY24, we do expect the pace of demand growth to be subdued relative to initial expectations.
“In the meantime, we will continue to respond to market signals and adjust our forecast Farmgate Milk Price to ensure that the impact of current prices and currency movements is transparent.
“This is a challenging time for New Zealand’s dairy farmers and the Co-op is doing all it can to support its farmers,” says Mr Hurrell.
A history of dairy payout levels for all companies is here, along with the most recent analyst forecasts.
59 Comments
You have to take advantage of the gold when it's there. China has played a huge part in New Zealands wealth in the 2000s.
Should we have just ignored that market? The Middle East, Europe and North America have not paid as well or taken enough product. Why on earth give our product away for the last 20 years? Its easy for you to say we should have diversified. They have done what they can. And taken the huge money from China in the offing.
Theres plenty to talk about when it comes to Fonterra. But China was a gift, for 20 odd years. Why wouldnt you?
Mofo...you seem to think its black and white. From a sheep farmers perspective, we are also watching our products value go down the tubes. But I have benefitted from Chinas better pricing on lamb and especially mutton hugely over the last few years. We simply could not get that money anywhere else.
You say we should be 'diversifying' ...dont you think our marketers try? For gods sake...you dont look a gift horse in the mouth. And that is what China has been to New Zealand farming. No one else wants to pay for our mutton. Yes now we go back to getting f all, but boy it was good while it lasted. You know Samsung could say the same. No one buys a new phone every year now. But jeez it was great while they did.
I dont know how many times as farmers we were told to 'diversify'. I have seen so many who did lose the shirt off their backs. We have ups and downs. So what.
We have nothing but coal to dig out of the ground. We cant do that.
We cant get the oil and gas. Cause..well ...you know...
We have over fished our ocean
We are planting our hills in pinus radiata..god forbid if that lot gets set alight.
We are over the tourists and perhaps they are over us. Plus its not 'sustainable'
We shut Hollywood out a couple of years ago, so they moved on.
People say diversify but how does that help in a recessionary environment. People carry on eating. They dont have to buy tech. Or travel. Or build stuff. We should be enthusiastic about all the great food we produce. Even when the shit hits the fan.
Rastus - its actually worse, the clowns impersonating a govt and their obstructionist bureacrats have de motivated many in business to the point that its almost too hard to create anything new profitably and surprise surprise little new or profitable is being created. I live more in hope than expectation that even a new more pragmatic Govt will improve things significantly.
Even the Norwegians and Saudis have gradually moved towards a diversified export portfolio. Both those countries rank better than us in export complexity.
Here in NZ, we had a good run with high dairy prices and cheap debt but sunk all of that mostly on houses and shiny cars.
Because even as a child you would have been told not to put all your eggs in one basket.
it’s quite a clear simple message about spreading risk through diversification.
Farmers very happy to charge local economy export (China rates) whilst polluting our rivers and streams. Don’t expect any sympathy now the Chinese are pulling back. That social contract was broken decades ago
There was already blood on the streets. In the paddocks, in the rivers, in your glass of milk. DairyNZ reports two MILLION bobby calves killed last year, just to keep the dairy cows in a constant state of milk production. Fonterra hides the violence from the public, but this is an extremely brutal industry, much more than meat production. At least with meat there's only one death, and not the annual barbarism of tearing offspring away from a distraught mother, so that we can steal her milk intended for her babies. When you actually stop and think about what's happening, you realize it's truly sick.
I agree Pigeonbox it isnt great. But an unusual place to find wisdom was Kevin Costners character on Yellowstone.
The substance of it was this. A vegetarian obviously still eats. And to grow the vegetables and grain that you eat requires many more deaths. When you plough a paddock the creatures that live there die. Some horrifically, ie little ground living mammals and birds and insects smashed up by machinery, or killed with sprays, or their habitat completely gone. To plant a crop you must kill everything else. Every butterfly. Every slug. Every weed. Every hare. Rabbit.Hedgehog.
I have family that once again have seen some pretty bad stuff from our largest dairy farmer owner in New Zealand. Its a work in progress and we need more enforcement MPI staff. But we all eat, and that requires death. Crop, fruit and vegetable farming is infinately worse, as nothing lives in that environment bar that vegetable or crop. At least with cattle or sheep farming the rabbits birds hedgehogs insects etc can share the space.
You (pigeonbox) may not be aware that there is fairly extensive research literature on the "crop death" argument, better described as "Field Deaths in Plant Agriculture":
"If we were to average Davis and Archer’s estimates, and limit the estimate to harvested cropland (which would be to ignore the other ways that animals might be killed on cropland left fallow), we would get a dramatic number: over 7.3 billion animals killed each year. That’s remarkably more than the number of cattle or pigs slaughtered every year in the U.S. (roughly 40 and 120 million, respectively) and not too far from the number of broiler chickens killed there also (roughly 9 billion)."
This paper then continues to discuss calculation errors, and methodological/philosophical nuances such as 'The Counterfactual Problem' which addresses how to count the deaths of animals that were only able to be born due to the agriculture.
https://sci-hub.se/https://link.springer.com/article/10.1007/s10806-018…
The insects cop it too. I remember the days the car windscreen was splattered consistently. Not anymore. I dont even bother upending my gumboots each morning to tip out the wetas or huhus. There simply arent any. Anyone remember the large green Puriri moths? Usually one night a year they would be everywhere around the house. Loads of them. Last year I saw 3. Its got so weird the blowflies hardly exist. Back in the day chuck a mutton roast on, 100 blowies would head for the kitchen. Lucky to see half a dozen. We dont do much cropping in our area, but 1080 gets biffed around a lot.
Its not like those calves were killed and simply dumped in a pit somewhere out back. They were all processed and eaten. Where do you think pet food comes from?
I also find it ironic that the same people who think its unethical to kill baby calves are the same ones who have no problems killing human babies in utero. Perhaps farmers should be aborting calves at almost full term to make it morally acceptable to these people?
There's probably quite a bit of overlap between pro-choice and pro-animal rights/vegans. The obvious difference is virtually no one is so pro-choice that they would permit abortion of healthy, near full-term babies. I suspect an early abortion of male calves before they are able to feel pain would be considered much better than knocking them on the head shortly after birth, if such a thing were practical.
I would think the opposite: if somebody is morally opposed to senseless killing - just because the victim is considered inconvenient, accidental, or a waste product - then they would, in principle, be opposed to both?
It feels like you have a sort of lazy Gen Z/woke stereotype in mind without actually knowing anyone who matches what you're describing.
they tried that but the farmers were against putting money aside from the dividends to grow into another nestle, that was the whole point of listing on the share market to get the capital to expand , that management was booted and the new management came in and starting selling those bits (i.e tip top) and is looking at getting rid of the stock listing so they could concentrate on WMP and cheese.
Fonterra biggest problems is its structure, it is designed for short term profits for farmers so is always stuck in too much production of the low value products and not manufacturing of higher value products.
until you can separate fonterra into 2 parts and give the farmers the choice if they want to hold shares in the manufacturing of higher value added Commodities (which they will sell almost straight away) they are going to come under increasing pressure from china in the production of WMP and cheeses as their production ramps up
With a global decline in milk prices, I wonder if our milk/ cheese here in nz drops,, I don’t think so, we are mugs ,just paying it, if the global milk prices have dropped 30% roughly, we should be paying 30% less for our milk here in nz, ( in a couple of months that is) cant see that, someone is creaming it hear in nz,,, not pun intended
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