August milk price announcements FAQ

Get the background on Fonterra’s revised forecast milk price 2015/16, Fonterra Co-op Support, forecast available for payout and milk volume forecast 2015/16.

Why are you offering this support to farmers now? 

We’re putting our farmers first because their milk underpins the success of our Co-op. Fonterra Co-op Support will help our farmers with their on-farm budgets. 

Although the global situation is making conditions difficult for all dairy companies, we’re is uniquely placed to help our farmers because of our underlying strength. 

This is all about harnessing our co-operative’s collective strength - we’re getting these tough times together.

 

Where is the support coming from? 

The loan would be funded by one-off savings generated by changes the business is making, such as improving working capital. 

Dairy will come back. This is an investment in the future of our Co-op. Get all the details on the Fonterra Co-op Support

 

Current season forecast Farmgate milk price 2015/16

 

What’s behind the reduction in forecast since May? 

There’s an imbalance between demand and supply – that’s what we’re seeing on the Global Dairy Trade auction, it’s affecting dairy companies around the world, not just us. 

The average GlobalDairyTrade (GDT) auction winning price in the last round dropped 9.3% to US$1,815. Since early March, when we set the June Guaranteed Milk Price at $5.25 per kilogramme of milk solids, the average fall in dairy prices has been 46%. 

 

Will there be further Farmgate Milk Price forecast changes this season?

We always aim to give the best possible forecast estimate so farmers can use this information to manage their businesses. 

Global markets are still volatile - the general thinking is that prices won’t recover significantly until next year based on current conditions. We’re watching what’s happening closely, and will let our farmers know if there is any reason to change the forecast again.

 

Milk volume forecast 

 

Do you expect this season’s milk volume to reduce? 

Our forecast is the New Zealand milk volume for this season will be 1,589 million kgMS, that’s down 2 per cent from 1,614 kgMS last season. 

 

What’s behind the reduction? 

Our farmers are lowering on-farm costs by using more traditional practices, by reducing stock rates and supplementary feed. It’s a return to our traditional strengths – pasture is the cheapest form of feed, our system in New Zealand is largely pasture-based, and we expect to see this trend continue. 

 

Earnings guidance 

 

What are the main factors affecting earnings guidance? 

We expect them to be:

- the positive impact of the lower Farmgate Milk Price on consumer margins globally for New Zealand-sourced products

- the contribution from changes being made within the business

- movements in New Zealand product mix returns

- lower returns on Australian product mix returns

 

What is this season’s pidend range higher than last year’s?

The business is performing well, and is making changes that are delivering savings, but obviously global dairy markets remain volatile.  

We will continue to update our farmers and the market as the year progresses