Sharechat Logo

Fonterra affirms 2015 milk price payout of $5.30/kgMS

Wednesday 12th November 2014

Text too small?

Fonterra Cooperative Group chairman John Wilson has affirmed the world's biggest dairy exporter plans to pay its farmers $5.30 per kilogram of milk solids for the 2015 season.

Wilson affirmed the payout in presentation slides for Fonterra's annual meeting in Palmerston North today. It also expects to pay a dividend of 25-35 cents a share, making a total payment of $5.55 to $5.65. The 2014 payout was $8.50 including a 10 cent dividend.

The Reserve Bank cited the reduced milk payout in its financial stability report, released today. While New Zealand's overall financial system remained sound, risks in the dairy sector increased as plunging global milk prices prompted a reduced forecast payout to farmers by Fonterra, it said.

"The forecast dairy payout for the coming season has been reduced significantly, and could result in rising loan defaults should the lower payout level persist," deputy governor Grant Spencer said in a statement.

Wheeler said the bank hadn't given any thought to imposing lending restrictions or ratios on dairy lending, and that about 10 percent of farmers still have about half of the sector's $33 billon in debt. The Reserve Bank expects dairy prices to recover early next year, supported by growing Chinese demand, though it said there is a risk of protracted weakness if global supply keeps expanding or if China takes longer to resume its forward purchasing.

Farmers had used last year's high price to repay debt, and the early signalling  gave them time to manage down their costs, which helps mitigate the threat posed by the dairy sector.

Spencer said farmers' deleveraging and higher farm prices meant average LVRs on dairy debt had reduced, meaning safety buffers in place on dairy farm debt have improved.

 

The Reserve Bank said farms using intensive methods on more marginal land and less able to substitute to feed produced on their own farms were particularly vulnerable, with limited scope to manage the downturn, and highly indebted farmers were likely to experience negative cash flow on the lower payout.

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Stanley-Tallwood liquidator cuts deal over KiwiBuild development
Stanley-Tallwood liquidator cuts deal over KiwiBuild development
RBNZ expected to keep OCR at 1% but leave door open to more easing
Watch for signs of domestic and global corporate health this week
ANALYSIS: Govt will have to pay up for high-rise and other construction
23rd September 2019 Morning Report
RBNZ needs more resources, not more powers: Bascand
NZ dollar hovers near 4-yr low after IMF says downside risks have increased
MARKET CLOSE: NZ shares gain; index reweighting drives heavy trading in Kiwi, Kathmandu
NZ dollar sags after avalanche of data and central bank action

IRG See IRG research reports