10 Aug 2015

Fonterra looks for ways to help hard-hit farmers

3:09 pm on 10 August 2015

Fonterra has admitted that times are tough for dairy farmers and the giant cooperative says it is looking at options to help alleviate hardship.

On Friday, Fonterra slashed its forecast payout for the season to $3.85 a kilo of milk solids - far below the break-even point for many farmers.

The drop has raised fears banks could soon force dairy farmers to sell their land.

Fonterra building

The Fonterra headquarters on Princes St in central Auckland. Photo: RNZ / Kim Baker Wilson

The industry organisation Dairy NZ says the average dairy farmer will probably make a total loss of about $260,000 to $280,000 this season.

Fonterra has already offered interest-free loans at a rate of 50 cents a kilo of milk solids for production between June and December.

Fonterra group director of co-operative affairs Miles Hurrell said the co-op was looking at ways it could help.

He said all options were on the table and, at this stage, nothing was being ruled out, including withdrawal from the Global Dairy Trade (GDT) auction process or a reserve price being set.

Mr Hurrell would not rule out having a guaranteed milk price for farmers, but said it was too early to decide.

John Key during caucus run 23/06/2015

The PM told the BBC that New Zealand had a much more diversified economy than people thought. Photo: RNZ / Alexander Robertson

Meanwhile, the Prime Minister John Key has downplayed the significance of the dairy market downturn in an interview with the BBC.

Mr Key claimed the economy has been doing well.

"The last five or six years, we've really come through the global financial crisis much stronger than everyone else, so the thing I would say is that while a lot of focus is put on dairy, and while it's obviously very important, it's 20 percent of our exports, it's about 5 percent of our overall economy," Mr Key said.

"We have a much more diversified economy than people think."

Dairy downturn already affecting retail

The dairy market downturn has started to hit turnover for Taranaki retailers, with sales declining by between 10 and 20 percent.

Michael Eager, who owns the R J Eager furniture stores in New Plymouth and Stratford, said it was taking longer to shift stock.

Mr Eager said his sales were down between 15 and 20 percent, and he expected them to drop further.

"We're already seeing a slowdown in retail sales, enquiries have dropped away, so it is impacting at the present time quite strongly, and particularly in the smaller towns," Mr Eager said.

Hawera furniture, whiteware and electronics store owner Royce Dimmock said things were not catastrophic but sales of big-ticket items were down about 10 percent.

Meanwhile, the manager of a big-box retailer in Taranaki, who did not wish to be named, said sales were 15 percent off target and he had four sales positions he was not filling because of the downturn.

Get the new RNZ app

for ad-free news and current affairs