Farmers brace for Fonterra forecast
Fonterra is expected to slash its forecast payout to farmers this afternoon, potentially wiping billions of dollars out of the rural economy.
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UPDATED: Fonterra slashes milk price
Fonterra is expected to slash its forecast payout to farmers this afternoon, potentially wiping billions of dollars out of the rural economy.
Further declines in dairy prices have prompted most analysts to pull back their expectations for Fonterra’s payout for this season to below $4 per kilogram of milk solids, which would make it the lowest in almost a decade.
Dairy NZ estimates $5.70/kg is the industry average breakeven point for most farmers.
"Farmers now face two consecutive seasons of extremely low milk prices," said AgriHQ dairy analyst Susan Kilsby. "Few farmers will be able to turn a profit at such a low milk price."
Already some sharemilkers have hit the wall, as revealed by NBR ONLINE today with the liquidation of a Feilding share milking business.
There are also reports of Waikato sharemilkers being put into receivership.
Continued weakness in dairy prices is being driven by increased supply from New Zealand, Australia, Europe and the US, lacklustre demand in China and an import ban in Russia. The lower prices come just as New Zealand production is rising, heading into the country's peak supply period in October.
"The current $5.25/kgMS forecast may have looked reasonable a few months ago but developments move quickly in commodity markets,” ANZ economists say.
Fonterra is also expected to provide guidance on the July 31 financial year and issue a production forecast for the current season, which ends on May 31 next year.
An announcement is expected after 2pm with a media conference at 3.15pm today.
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Farmers brace for Fonterra forecast
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