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Fonterra reduces milk price estimate
New Zealand dairy cooperative Fonterra has reduced its forecast farmgate milk price for the 2014/15 season from $7 (NZ) to $6 (NZ) per kilogram of milk solids. The cut translates into about a $1.6 billion reduction from the co-op’s earlier prediction and around $4 billion less in total farm income compared to last year.
Fonterra Chairman John Wilson says the cut reflects the continuing volatility in the world market with the Global Dairy Trade price index dropping 16 percent since June 1st. Wilson cites the build-up of inventory in China, reduced demand in developing countries due to higher prices and the strong New Zealand dollar as contributing factors.
Fonterra also announced an estimated dividend range of 20 to 25 cents per share amounting to a forecast cash payout of $6.20 to $6.25 for the current season which began on June 1st. Chief Executive Theo Spierings said the estimated dividend reflects the co-op’s expectations for improved returns on its value-added and branded products, given volume increases and lower input costs.
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