Fonterra’s $3.2b capital return to farmers set to boost rural incomes and NZ economy
According to ASB, Fonterra's plan to sell it's Anchor and Mainlands brands could inject $4.5 billion in additional spending into the economy.
He says in the present era of market volatility and low payouts, farmers need to go and check the balance sheet and really delve into their cost structure.
Hamilton, who has farms in the North and South Islands, says farmers need to get costs down to about $3.50/kgMS.
"My personal view is that if you average the Fonterra milk price over the last ten years it's about $6.00. So medium term if you have a sound business at about $6.00 you are probably ok. But if you haven't, you could well do with an assessment of your business."
Hamilton says dairy companies such as Tatua and Westland Milk Products, with a higher percentage of value add products, are more shielded from the volatility of the commodity market. He says while Fonterra does have some value add products, it's a very small percentage of their business. But he says it's hard to blame Fonterra for this given that they have to take all the milk produced in NZ.
