Survey shows most Fonterra farmers plan to use capital return for debt reduction
A large slice of the $3.2 billion proposed capital return for Fonterra farmer shareholders could end up with the banks.
According to Federated Famers, it looks increasingly out of reach after this morning's 1.4% drop in the GDT price index.
Today's result follows a 1.6% fall in the first auction of the year two weeks ago.
"Today's weak GDT result is disappointing and things are certainly looking much worse in terms of the farmgate milk price. We have just seen Open Country Dairy drop its forecast and this result increases the likelihood Fonterra will do the same," says Federated Farmers dairy chair Andrew Hoggard.
"It is still possible that a sudden upswing in prices could get us there, but we'd need to see some very large increases in the next couple of months to reach the $4.60 mark. Even that is a fairly poor payout for most farmers, and falling below that is just going to ramp up the pressure on the dairy industry and those that support it."
But Hoggard is urging farmers to have faith in the GDT model.
"This isn't about the system. It's economics 101. Supply is too high and demand is weak, which is keeping prices down. If kiwi farmers want to lay the blame somewhere they should look offshore to the subsidised production that still exists in too many other countries. Farmers in these markets are increasing production despite the market telling them the opposite."
"Kiwi farmers need this to be addressed and for more trade deals to open up new markets and grow the overall pie. New agreements such as TPP have the potential to make a big difference over time but unfortunately they won't ease the short term pain our dairy farmers are feeling."
