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9 Dec 2014
NZ's farmers in a position to handle one tough year - ANZ
FXStreet (Bali) - NZ's Fonterra has decided to cut the 2014/15 forecast farmgate milk price to NZD 4.70/Kg from NZD 5.30/Kg, with ANZ providing some insights worth a read pre-release.
Key Quotes
"Everyone has been holding their breath for Fonterra’s update on the farm-gate outlook for 2014/15 this morning. No doubt a cut is on the way, but how much optimism will be factored into this latest round of forecasts is of primary interest. For the record we have had a milk price range of $4.75 to $5.00/kg MS ($4.85/kg MS mid-point) for a while, but are definitely toward the lower end of this today."
"A slight offset is the likelihood that the dividend range will be raised at least above $0.40 per share if not more (although this is difficult to forecast). Net on net though another downward revision to incomes is coming and this will add to financial stress."
"All the other independent companies that account for nearly 14% of NZ’s milk supply have been moving their milk price payout forecasts lower in recent months. Yesterday New Zealand’s second largest dairy processor, Open Country Dairy set the bar even lower moving to a range of $4.50-$4.70/kg MS."
"While cashflow for the 2014/15 financial year doesn’t look as bad as the headline numbers, courtesy of the record the year before, today’s anticipated cut is really going to tighten things up in 2015/16."
"Overall the sector is in a position to handle one tough year below sub-$5/kg MS, but if a recovery in international prices doesn’t occur over coming month’s thing will become much more problematic in 2015/16."
Key Quotes
"Everyone has been holding their breath for Fonterra’s update on the farm-gate outlook for 2014/15 this morning. No doubt a cut is on the way, but how much optimism will be factored into this latest round of forecasts is of primary interest. For the record we have had a milk price range of $4.75 to $5.00/kg MS ($4.85/kg MS mid-point) for a while, but are definitely toward the lower end of this today."
"A slight offset is the likelihood that the dividend range will be raised at least above $0.40 per share if not more (although this is difficult to forecast). Net on net though another downward revision to incomes is coming and this will add to financial stress."
"All the other independent companies that account for nearly 14% of NZ’s milk supply have been moving their milk price payout forecasts lower in recent months. Yesterday New Zealand’s second largest dairy processor, Open Country Dairy set the bar even lower moving to a range of $4.50-$4.70/kg MS."
"While cashflow for the 2014/15 financial year doesn’t look as bad as the headline numbers, courtesy of the record the year before, today’s anticipated cut is really going to tighten things up in 2015/16."
"Overall the sector is in a position to handle one tough year below sub-$5/kg MS, but if a recovery in international prices doesn’t occur over coming month’s thing will become much more problematic in 2015/16."