Fonterra Co-operative Group Limited has today announced that the forecast total payout available to farmers in the 2015/16 season will be $4.25-$4.35, comprising:
· Forecast Farmgate Milk Price $3.85 per kilogram of milksolids (kgMS)
· Forecast earnings per share range of 40 – 50 cents per share.
Fonterra has also announced Fonterra Co-operative Support of an additional 50 cents per shared-up kilogram of milksolids to support farmers this season.
Revised 2015/16 Farmgate Milk Price Forecast
Chairman John Wilson said the Farmgate Milk Price forecast has been reduced from $5.25 kgMS to $3.85 per kgMS due to the continued significant imbalance in the global dairy market between weak demand and surplus supply.
“Current prices are unsustainably low and we are seeing them beginning to impact production levels globally. We have confidence that prices will recover over the course of the season. However, it will be a tough season for our farmers.
“We know the global dairy market will improve. The hard thing to call at the moment is exactly when and how quickly,” said Mr Wilson.
Forecast available for payout
Chief Executive Theo Spierings said: “As part of this work and given the current pressures facing our farmers, we have reviewed our capital expenditure for the next two years. As a result we are now targeting a spend of $500million – $600million less for 2016 financial year compared to FY15.
“We will continue to update our farmers and the market on business performance and the delivery of expected gains from the transformation of the business as the year progresses,” said Mr Spierings.
Mr Spierings said Fonterra continues to believe strongly in dairy and this farmer support is an investment in the future of the Co-op.
A Fonterra Co-operative Support schedule will be made available as part of the application process.
Milk volume forecast 2015/16
Fonterra has reduced its New Zealand milk volume forecast for the 2015/16 season to 1,589 million kgMS, 2 per cent lower than the previous season.
Chairman John Wilson said the revision reflected the likely impact of farmers using more traditional practices to manage their farm businesses within the limits of a low payout forecast.
“We expect to continue seeing our farmers make these sorts of on-farm decisions – particularly in light of today’s announcements,” said Mr Wilson.