28 May 2015

Fonterra announces forecast payout

5:00 pm on 28 May 2015

Fonterra said its focus would remain on generating cash to support its hard-hit farmers after issuing downbeat payout forecasts.

Fonterra logo

Photo: AFP

Weak dairy prices prompted the country's largest company to reduce its forecast payout for the current season by 10 cents, to $4.40 a kilo of milk solids, and set what it called a cautious opening price of $5.25 a kilo for the next season.

Chief executive of Fonterra Theo Spierings said he was expecting a gradual improvement in demand from China and the Middle East, but unforeseen events, like drought, could push prices up quicker.

Analysts estimate dairy farmers need at least $5.50 to $6 dollars a kilo to break even, and a second season of below break even prices would heap more pressure on farmers already struggling with debt.

Fonterra was easing that burden by lifting its opening advance to $3.66 a kilo, to be paid in August.

Mr Spierings said the company was focusing on selling more volume in its food service and value-added ingredient business, which he said was going well.

Get the new RNZ app

for ad-free news and current affairs