Fonterra Cooperative profit announcement boosts confidence

Federated Farmers Dairy is delighted at the confidence boosting manner in which Fonterra Cooperative Group has strengthened its balance sheet to its strongest ever position.

“This puts to bed, once and for all, the notion that New Zealand’s farmers made the wrong choice in keeping Fonterra as a Cooperative,” says Lachlan McKenzie, Federated Farmers Dairy chairperson.

“This result is inspirational and motivational and Federated Farmers applauds Fonterra for its efforts. Speaking personally, I am proud to supply Fonterra and all right thinking New Zealanders ought to share that pride.

“We have a world scale corporate that is completely New Zealand owned and farmers are determined to keep it that way.

“Farmers are delighted the final season payout for 2009/10 has been confirmed at $6.10 per kilogram of milk solids (kg/MS). While this is the second highest payout ever, the fact is, our cost structures are significantly higher.

“Recent Ministry of Agriculture & Forestry (MAF) modeling also puts the break even point for the bottom 10 percent of dairy farms at around $6.06 kg/MS and even for the leading 10 percent, it’s around $4.26 kg/MS.

“While there will be excited headlines about what this means nationally, in no way will this payout add to inflationary pressures.

“Retiring debt and on-farm productivity are the priority for farmers and the weak sales data for rural land, testifies to this. We’re focused on following Fonterra’s lead by strengthening our on-farm balance sheets.

“Yet the thing which is inspirational about this announcement is the profit per share at $0.60, of which $0.27 is being paid out in total dividend. That means Fonterra is retaining money to grow the Cooperative.

“Frankly, a large slice of what Fonterra now exports is value-added and when you see the rich innovation that is coming on stream, it makes you really optimistic about the future.

“Looking forward, the current 2010/11 season forecast of $6.60 kg/MS has been reaffirmed and that again is tremendous news. But Federated Farmers stands by its belief that in-season volatility is now upwards of $2 kg/MS, so budgets should remain conservative.

“Fonterra’s success and that of its farmers is important to all thinking New Zealanders, because we’re all helping to grow the New Zealand economy,” Mr McKenzie concluded.