The Weekly Dairy Report: Fonterra announced good profits and a dividend forecast that could see a $4.30 return for fully subscribed shareholders

Some rain last week and more predicted this week will restore dry pastures to green and stimulate brassica crops much needing a drink in drier areas.

Autumn dews are arriving, and with shorter days pasture growth rates are slowing and managers are now focusing on ensuring body condition scores are being maintained and quality feed accumulated for late autumn production.

Reports suggest there is plenty of winter feed about with many dairy farmers planning to winter at home or trying to talk down the market as the dairy crisis moves into the graziers domain.

Market news is still very gloomy with most analysts predicting a slower return to profits than anybody wants, and all eyes will be on Fonterra’s financial announcement on Wednesday.

This morning they announced a much improved profit of over $409 million (up 123% on last year) and a dividend forecast of $0.40c/share which is planned to be distributed with 20c in April and if the forecast is sound another 10c in May and the final 10c in August.

Some will be retained as they have increased the dividend forecast into the 45c-55c range and also announced, much to the relief of many, that the debt should be between 40-45% by the end of the financial year.

They explained they have used many more litres to create added value products but this has been at the expense of low milk prices farmers are being paid.

The Co-Operative needed some positive news to restimulate shareholders for better times ahead, after this prolonged downturn and poor PR associated with their new 90 day payment terms.

Auction results failed to inspire last week with another 2.9% drop even with the lowest volumes offered this year, but at least whole milk powder prices stayed steady amongst other commodity falls.

Synlait reports they have signed up more farmers to supply their growing nutritional business, as some decide to sell their Fonterra shares to release the severe cash flow pressure they are under.

Dairy NZ has challenged farmers to improve their international competiveness with pasture, and urges managers to get their costs under control.

The dairy debt crisis has again been highlighted with 10% of the sector owing 30% of the debt that has now grown for this group to $10 million per farm.

Reports from Southland are that there are 35 farms under bank control and some nervousness at what price they will be sold up for, and that effect on land values in that province.