Fonterra has cut its forecast payout for farmers, following sharp falls in global dairy prices.
New Zealand's largest company reduced its forecast milk payout from $7 to $6 per kilo of milk solids for the current season.
Fonterra chief executive Theo Spierings. Photo: RNZ
Fonterra chairman John Wilson said dairy auction prices have fallen 16 percent since the start of the season at the beginning of June.
He blames it on strong global production, a build-up of stocks in China and weaker demand in some emerging countries.
Mr Wilson said the drop in the forecast payout will hurt their farmers' incomes, but lower milk prices help Fonterra's dividend payout.
Fonterra announced an estimated dividend range of between 20 to 25 cents a share, which chief executive Theo Spierings said was higher than last season's due to cheaper milk input costs.
Fonterra does expect some recovery in dairy prices, but said it was too early to predict how strong this recovery would be or when it would kick in.
Federated Farmers' dairy chairman Andrew Hoggard said was surprised at the drop. He believed about 20 percent of farmers would make a loss with a $6 payout.
Labour Party primary industries spokesperson Damien O'Connor said Fonterra's farmers may be wondering why, at a time when their forecast payout has been cut, the dividend payout is going up.
"I think this is part of TAF (Trading Among Farmers) - the inevitable conflict between dividend payout and milk payout has reared its head now."
