Westland Milk cuts 2015 milk payout forecast, citing oversupply, high kiwi

Wednesday 26th November 2014

Westland Milk Products, the Hokitika based dairy cooperative, has cut its forecast milk payout for the second time in four months, saying a global over supply of dairy products and a relatively high kiwi dollar had crimped cash flows.

Westland cut its forecast for the 2014/2015 season by 40 cents to a range of $5 to $5.40 per kilogram of milk solids, from a previous range of $5.40 and $5.80/kgMS. The move keeps Westland on pace with Fonterra Cooperative Group, which lowered its forecast to $5.30/kgMS from $6/kgMS in September. The continued slide in dairy product prices has analysts speculating Fonterra may further revise the forecast.

“This will be unwelcome news for shareholders, but not unexpected,” chairman Matt O’Regan said in a statement ahead of the annual shareholders' meeting. In October, "we warned suppliers that the high level of in-market stocks held by dairy customers was producing downward pressure on prices, especially in the area of bulk milk powders where the majority of our business is still conducted."

Skim milk powder, which makes up "a substantial proportion" of Westland's production, fell 12 percent in the latest GlobalDairyTrade auction. The GDT average winning price slid 3.1 percent to US$2,561 at the latest auction, the lowest level since August 2009, prompting economists at ASB to cut their milk price forecast to $4.70/kgMS.

The kiwi dollar recently traded at 78.12 US cents, and has dropped about 12 percent from a peak in early July.

BusinessDesk.co.nz

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