Tuesday, 17 December 2019 10:16

Dairy’s Christmas cheer

Written by  Sudesh Kissun
Happy days: Fonterra shareholders council chairman James Barron. Happy days: Fonterra shareholders council chairman James Barron.

After a challenging year, dairy farmers will go into the festive season buoyed by high farm gate milk prices.

Major milk processors Fonterra and Open Country Dairy are signalling a forecast payout of well over $7/kgMS for the season.

Last week, Fonterra lifted its forecast milk price by 25c to a range of $7 to $7.60/kgMS. OCD has announced a range of $7.30 to $7.60/kgMS for December and January. And for February to May next year the independent processor will pay suppliers $7 to $7.30/kgMS.

Whole milk powder (WMP) prices, a key driver of the milk price, have hit their highest level since December 2016, reflecting a global dairy market that is tipped slightly in favour of demand.

Fonterra shareholders council chairman James Barron says the lift in the forecast price will give farmers some confidence going into Christmas.

“The farm gate milk price is at a sweet spot,” he told Rural News.

OCD chief executive Steve Koekemoer told its suppliers that stronger pricing being received in market and the foreign exchange now starting to flow through have resulted in the further upside.

“All settlement periods have stepped up, with the biggest moves being the November and January periods. 

“You will notice that all our forward periods are now in the $7 range as we gain more confidence in the supply/demand for the balance of the season.”

For Fonterra farmers, a positive first quarter result will also help boost confidence.

Barron says farmers are happy to see the co-op deliver under its new strategy of a triple bottom line: healthy people, healthy environment and healthy business.

However, he points out that challenges loom on the horizon: weaker Chinese economy, unrest in Hong Kong and Chile and the pressure on profit margins of value added products due to high milk prices.

Federated Farmers vice president Andrew Hoggard says it’s still early days, and the proof of Fonterra’s turnaround will be if they get a dividend again at the end of this financial year.

Hoggard says farmer shareholders will be happy to see the co-op move in the right direction.

“I mean, they weren’t happy when our co-op was moving in the wrong direction,” he told Rural News.

Fonterra announced a positive first quarter result, achieving a gross margin of $740 million, up from $646m last year.

Operating expenditure is down by $104m, and debt is reduced by $595m compared to same period last year.

Chief executive Miles Hurrell says the cooperative has made good progress moving to its new strategy and has had a strong first quarter.

More like this

Is he the right Guy for Fonterra?

Former Primary Industries Minister and Fonterra board aspirant Nathan Guy believes his relationships with bureaucrats in Wellington will help the co-op’s farmers immensely.

Fonterra back in the black

Fonterra chief executive Miles Hurrell says 2019/20 was a good year for the co-op, with profit up, debt down and a strong milk price.

Featured

 

National

Beef+Lamb pushing for changes

Farmer-good organisation Beef+Lamb NZ (BLNZ) says it will continue to advocate for changes to the new fresh water regulations.

Machinery & Products

JD updates header line-up

John Deere has updated its entire header line-up for combines to include the new HDR Rigid Cutterbar Drapers, RDF HydraFlex…

Hybrid harvesters launched

New Holland has entered the world of hybrid headers, launching a new machine that blends its conventional threshing drum and…

» Latest Print Issues Online

The Hound

Burn!

OPINION: This old mutt had to have a giggle at the dig Feds recently made at the Green Party in the…

Why?

OPINION: Your canine crusader was aghast to read that the prices of zucchini and cucumbers rose more than 30% in…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter