Fonterra drops forecast milk volumes by 3.3 percent, reduces sales

Thursday 29th January 2015

Fonterra Cooperative Group, the world’s largest dairy exporter, reduced its milk volume forecast for the 2014-2015 season by 3.3 per cent due to the impact of dry weather on production in recent weeks.

Fonterra expects 1,532 million kilograms of milk solids in the current season, below its December forecast of 1,584/kgMS which matched last season's production, the Auckland based company said in a statement.

Fonterra said daily milk production was now 6.1 percent lower than at the same time last season, as farmers appear to be using more traditional practices to manage their farm businesses following a lower payout forecast. In December, Fonterra slashed its forecast farmgate milk price for this season to $4.70/kgMS from last year's record $8.40/kgMS, which is expected to reduce dairy industry incomes by more than $6 billion.

“In the first half of the season, excellent pasture conditions resulted in milk volumes being higher than the previous season,” said Miles Hurrell, Fonterra's group director of cooperative affairs. “The situation has changed significantly over the course of this month.”

In some regions pasture quality has declined markedly since mid January and some farmers are drying cows off early, Hurrell said. There has also been a drop in feed supplements as it doesn’t stack up economically to use them widely this season, he said.

Fonterra said it can meet all its current sales commitments but in light of the reduced milk volume forecast, it will reduce the amount of product offered on the GlobalDairyTrade auction platform and through its direct sales channels.

Units in the Fonterra Shareholders' Fund, which are entitled to the dividends from Fonterra shares, advanced 0.2 percent to $5.86.

BusinessDesk.co.nz

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