8 Jun 2015

Synlait adjusts milk price, sets new forecast

5:03 pm on 8 June 2015

South Island-based Synlait Milk is the latest producer to forecast small improvements in dairy prices, despite trimming its forecast milk price for the just-completed season in the wake of continuing falls in international dairy commodity prices.

Dairy cow.

Photo: SUPPLIED

The company is forecasting a milk price of $5.50 a kilo of milk solids for the upcoming season, which is a little above Fonterra's $5.25 starting price but below Westland Milk Product's starting range of $5.60-$6.

Synlait managing director John Penno said supply was outstripping demand, due to Russia's ban on dairy imports, the removal of dairy quotas in Europe and low demand from China. However, Mr Penno said he was confident prices would recover by the start of next year.

The company also lowered its forecast payout for the just-finished season from a range of $4.50-$4.70 per kilo to $4.40-$4.60 a kilo, which is similar to Fonterra's adjusted price of $4.40.

Mr Penno said, to help farmers with cash flows over the next difficult few months, Synlait would start monthly advance payments for the new season at a higher than usual rate.

"We know that our farmers are going to have very poor cash flows through August, September and October, because such a proportion of this year's milk price has already been paid to our farmers - so we're trying to push as much as we can through those first three months to help their cash flows as much as we can," he said.

"We're starting out at $4 a kilo for the first three months and then stepping back a little, unless commodity prices improve in the interim.

"It's not much in the scheme of things, but it will help. Probably the more helpful thing we've done is give them very good information on what their likely cash flows are going to be through this period, so that they can plan for themselves and we're confident that most of them have done that very well."

It will announce the final milk price for the 2014/15 season in late September.

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