Fonterra has held its milk payout forecast steady at $4.25 a kilo of milk solids - but the dairy giant has changed the way it calculates the payout to effectively boost it by 4c to 5c.
Fonterra [NZX: FSF] has held its milk payout forecast steady and says it expects earnings per share of 50c to 60c for the year ending July 2017.
The dairy giant says with the expected payout at $4.25 per kilo of milk solids, that means the total payout available will be between $4.75 and $4.85.
Chairman John Wilson says with the payout remaining the same, “it is another financially challenging season for farmers.
“The co-operative is aware of how tough the situation on farms remains.”
The average farmer needs a payout of about $5.20 to break even.
“We are focused on delivering as much cash as possible to our farmers by bringing payments forward while maintaining a strong balance sheet.”
Mr Wilson says this is the company’s best estimate “at this early stage of the season.”
He says he expects the global milk supply to come into balance over the course of this season and that he expects the New Zealand milk collection will fall 3% this season.
Chief executive Theo Spierings says the returns from Fonterra’s higher returning products continue to grow.
Calculation change
Although Fonterra has held the payout forecast steady, it has also changed the way it calculates it and this effectively boosts it by 4c or 5c a kilo.
The co-operative's constitution requires it to pay the maximum sustainable amount, based on the sale of commodity products.
Fonterra says until now it has used only sales through its fortnightly global dairy trade (GDT) auctions for whole and skim milk powders and anhydrous milk fat.
"Fonterra will now include the revenue from spot sales of commodity whole and skim milk powders and anhydrous milk fat in its farmgate milk price calculation," it says.
Based on the experience of the past four years, that boosts the payout by 4c or 5c a kilo, it says.
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