Fonterra's NZ November milk collection only slightly higher as dry weather takes toll

Thursday 21st December 2017

Fonterra Cooperative Group's domestic milk collection was only slightly higher in November despite weak numbers a year ago as the recent dry weather takes a toll.

Auckland-based Fonterra collected 199.1 million kilograms of milk solids in November, up 3 percent on the same month a year earlier, while the year-to-date collection increased 1 percent to 702 million kgMS. It noted that collections in November last year were already well down on more usual levels and "recent dry weather across the country, particularly in the lower North Island, had caused soil moisture and pasture quality to decrease, impacting collections in late November and early December."

Fonterra said dry conditions are expected to continue and intensify, which would "significantly impact" New Zealand production. On Wednesday, Minister for Agriculture and Rural Communities Damien O’Connor said the government was closely watching the dry conditions. In the worst-case scenario, criteria for a medium-scale event could be met as early as January, he said.

November collection on the North Island was 117.8 million kgMS , up 1 percent on the year. South Island milk collection lifted 5 percent on the year to 81.3 million kgMS.

Fonterra said its Australian milk collection rose 28 percent to 17.4 million kgMS in November and season to date collection lifted 26 percent to 70 million kgMS. Fonterra attracted new farmer suppliers across the Tasman from rival Murray Goulburn after Australia's biggest dairy cooperative was wrong-footed by a slump in global prices, and as growth has been supported by strong seasonal conditions across all regions.

In a three-month business update to the end of October, Fonterra said performance was broadly in line with expectations. Overall volume was down 20 percent to 3.9 billion LME or liquid milk equivalent, reflecting lower opening inventories and lower milk collection phased towards the end of the quarter. Despite these lower volumes, revenue increased 4 percent to $4 billion due to strong global pricing and demand, it said.

Units in the Fonterra Shareholders Fund, which gives investors exposure to Fonterra's earnings, last traded at $6.40, having gained 6.7 percent this year.

(BusinessDesk)

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