28 Aug 2014

Westland Milk reduces forecast payout

5:25 pm on 28 August 2014

The country's second largest dairy co-operative, Westland Milk, has revised its forecast payout for the 2014 to 2015 season due to falling prices and volatility.

dairy cows

Westland Milk has revised its payout forecast to $5.40 per kilogram of milk solids. Photo: PHOTO NZ

In July, the firm announced a predicted payout of $6-$6.40 a kilogram of milk solids, but it has now dropped that to a range of $5.40-$5.80 (compared with Fonterra's current $6 forecast).

At last week's global dairy auction, the skim milk powder price dropped 12 percent.

Westland chief executive Rod Quin said that powder made up a significant proportion of its production.

"We produce a lot more skim milk powder than we do whole milk powder so we have a higher dependence on skim prices," he said.

"Now we don't see prices as low as what the auction result delivered, but they're certainly well down on what we were a month ago. So that's a key driver."

Mr Quin said that wider market disruptions were coming through "fairly lacklustre" demand from China. "We certainly are aware that they have got more stock in their warehouses than they previously anticipated."

He said more falls could be on the cards.

"There's a lot of disruption in the market place at the moment, a lot of volatility on the table. Our view is one that is to be more conservative around what we are signalling to our farmers, so that they can plan accordingly.

"There's potentially further downside risk. Equally, we see there could be some upside, but we see that upside further out in the season. So we've revised accordingly. We've always said to our farmers, we'll tell you when we see it."

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