Synlait cuts forecast milk payout for this season as prices remain low

Monday 1st February 2016

Synlait Milk, the NZX-listed dairy company, cut its forecast milk payout for this season as global commodity prices stay lower for longer.

The Rakaia-based company lowered its forecast milk price for farmers for the 2015/16 season to $4.20 per kilogram of milk solids, from a previous forecast of $5/kgMS, it said in a statement.

Synlait's revised forecast comes after similar moves this year from rivals Fonterra Cooperative Group, Westland Milk Products, and Open Country Dairy. The milk processors are reducing their forecast payouts because global oversupply is weighing on prices.

“Our previous forecast of $5/kgMS expected prices to recover somewhat by this stage in the season, however this hasn’t happened and our revised forecast reflects this,” said chairman Graeme Milne.

“There is still a lot of uncertainty," he said. "While our business is focused on value-added products, global commodity pricing is the main driver behind the milk price that our suppliers receive. European milk production is high following the removal of quotas last year. Low oil prices mean cheap feed for farmers in Europe, USA and China while demand for imported dairy commodities by China, the world’s largest importer, has declined as their local milk production has increased.”

Synlait expects to revise its forecast milk price again in May.

Its shares were unchanged at $2.88, and have slid 8.9 percent so far this year.

(BusinessDesk)

BusinessDesk.co.nz

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