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Fonterra reduces dividend

Fonterra

Continued difficult times for New Zealand dairy producers. Fonterra, the nation’s largest dairy cooperative reports net profit for the six months ending January 31st totaled $183 million down 16 percent from the same period a year ago.  As a result, the co-op kept its farmgate milk price at 4.70 per kilogram of milk solids but lowered its dividend forecast about a nickel.  That puts the total farmer pay price at $4.90 to $5 which is below the cost of production for New Zealand producers.  A year ago the total pay price was $8.50.

Fonterra is the largest dairy exporter in the world with a large share of those sales normally going to China. For the six-month period ending January 31st, sales to China totaled $1.2 billion compared to $3.15 billion in the same period a year ago. Fonterra CEO Theo Spierings says he expects China’s product surplus will diminish in the coming months and they will return to the global market.

Oversupply is plaguing global dairy markets and while New Zealand’s production is running about 2 percent lower than a year ago, production is still increasing across much of the globe including the United States.

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