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Isn't it amazing that there's an "oversupply" of dairy, coal, iron ore, shipping - everything you can poke a stick at?
Fonterra drops forecast milk payout
Dairy cooperative Fonterra has cut its dairy payout forecast, after the milk price dropped from $4.15 to $3.90 per kilo of solids.
Photo: RNZ
/ Alexander Robertson
Radio
NZ,
8
March, 2016
Chair
John Wilson said difficult conditions in the globally-traded dairy
market had put further pressure on the forecast.
Prices
at the twice-monthly dairy auctions have fallen in four of the five
events held this year.
Mr
Wilson said Fonterra still expected added earnings per share from its
commercial activities of between 45 and 55 cents.
Listen
to more on Morning Report3 min 15 sec
He
said after retentions that would see farmers being paid between $4.25
and $4.30 a kilo. That would be the lowest payout in 13 years
The
co-operative said there was still a global surplus of dairy products
and two of the biggest consumers, China and Russia, had cut their
buying.
"This
further reduction in the forecast farm-gate milk price is the last
thing farmers want to hear in what is proving to be a very
challenging season," Mr Wilson said.
He
said the latest forecast cut would knock about $400 million from
farmers' incomes this season.
Chief
executive Theo Spierings said the global imbalance was expected to
continue for longer than previously expected and that would weigh on
earnings for some time.
"Our
forecast is based on no significant changes to either supply or
demand globally before the end of the year. However, a reduction in
the supply available for export before then could mean prices recover
earlier than currently expected," he said.
The
New Zealand dollar, which is often sensitive to dairy prices, fell
around 0.25 US cents after the announcement, and was also weaker
against most other major currencies.
Westpac
economist Michael Gordon said he thought the chances of another cut
to the payout forecast this season were slim but the latest blow
would further dent business confidence.
He
said it would also add pressure on the Reserve Bank to cut interest
rates to cushion the economy.
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