Fonterra revises payout forecast for 2011/12 season

Fonterra has announced a revised payout forecast for the 2011/12 season of $6.70-$6.80 for a fully shared up farmer, 45 cents lower than the opening payout forecast announced in May.

The revised forecast comprises a lower Fonterra Farmgate Milk Price of $6.30 per kg milksolids, down from $6.75. The season’s Distributable Profit range forecast of 40-50 cents per share remains unchanged.

Fonterra Chairman Sir Henry van der Heyden said the lower Farmgate Milk Price forecast reflected a continued softness in commodity prices and a stronger New Zealand dollar.

“This softness of commodity prices has been reflected on Fonterra’s online trading platform Global Dairy Trade (GDT), which has experienced eight successive price falls – and one uptick – since May,” said Sir Henry.

Overall, the GDT-Trade Weighted Index is down 15.7% since May 3 when the opening forecast of $6.75 per kgMS was announced.

Coupled with ongoing foreign exchange volatility and overall global economic uncertainty, the Board had revised down the Fonterra Farmgate Milk Price forecast.

Sir Henry said the opening forecast had anticipated an initial softening of international dairy prices, followed by a recovery.

“We aren’t yet seeing the recovery of international dairy prices we initially anticipated and we are also dealing with a much stronger New Zealand dollar.

“Higher prices often lead to increased supply into global markets from our global competitors, as well as reduced demand. We are seeing this and it is impacting prices.”

Sir Henry said the Board was committed to providing the best available information to farmer shareholders on a timely basis so they can plan accordingly. The forecast revision acted as a reminder to farmers to take a conservative approach with their farm budgets.

On the positive side, Sir Henry said there had been a strong start to the season. A long stretch of favourable weather in New Zealand had boosted pasture growth and contributed to record milk flows across the main dairying regions.