Tuesday, November 7, 2019
In spite of a recent decline in dairy prices, Fonterra maintains its forecast of a strong payout for farmers in the 2018 season will not change.
At the annual shareholders’ meeting in Hawera last week, the co-operative reiterated its forecast 2017-18 payout of $6.75 per kilogram of milk solids plus earnings per share in a range of 45 to 55 cents was firm.
This was on par with the revision at September’s Global Dairy Trade (GDT) result that brought the forecast total available payout to between $7.20 and $7.30, before retentions.
Last year, the final cash payout was $6.52 for a 100 percent share-backed farmer.
Fonterra chairman John Wilson said farmers had a good season in 2016/17 in spite of two seasons of unusually low milk prices.
Some analysts have been speculating the 2018 forecasts could be under pressure given the recent weakening in prices. Whole milk powder fell 0.5 percent to US$3,014 a tonne in the last GDT auction on October 17, the lowest since the April 17 sale.
But brokerage firm OMF said last month that global supply and demand suggested the possibility of a significant correction in the milk fat premium and potential for “considerable downside risk” to the farmgate milk price.
Fonterra had faced criticism for its partnership with Beingmate, whose shares fell since the New Zealand company took a stake of just under 20 percent in 2014 to cement a deal targeting China’s infant formula market and sales of Anmum trademarked products.
Fonterra Shareholders’ Council chairman Duncan Coull rated the company against its key performance indicators for 2017. He gave it ticks for the farmgate milk price, consumer and food service volumes. But he said the company failed in its earnings per share price which, at 46 cents, lagged behind the 50-to-60 cents target, he said.
The return on capital, which came in at 11.1 percent versus a targeted 13.2 percent, also fell short.
Last month, Fonterra trimmed its milk collection outlook for the 2018 season after a wet August and September affected production, especially in the North Island. It now forecasts 1540 million kilograms of milk solids for the year ending May 31, 2018 from a previous projection of 1575 million kgMS.