Fonterra Co-operative Group Limited recently reduced its forecast Farmgate Milk Pricefor the 2014/15 season from $6.00 to $5.30 per kgMS, andincreased and widened the estimated dividend range from 20-25 cents per shareto 25-35 cents – amounting to a forecast Cash Payout of$5.55-$5.65 for the current season.
Chairman John Wilson said the lower forecast Farmgate Milk Pricereflected continuing volatility, with the GlobalDairyTrade price index declining 6 per cent in the past twotrading events.
“The market is currently influenced by strong milk production globally, theimpact of Russia’s ban on the importation of dairy products, and the levels ofinventory in China. Some relief has been provided by exchange rates, with theNZ dollar recently showing some signs of falling against the USdollar."
“Under the current market conditions, there is further downside risk. However, the forecast reflects expectations that prices will increase in themedium term,” Mr Wilson said.Chief Executive Theo Spierings said the estimated dividend range reflected thepositive impact of a lower forecast Farmgate Milk Price on product margins but also significantvolatility in commodity prices.
“A lower forecast Farmgate Milk Price reduces input costs in our consumer andfoodservice businesses. In turn, we do expect to deliver increased returns as aresult of a recovery in margins on our products.“In addition, stream returns for Non-Reference Commodity Products such ascheese and casein are currently making a positive earnings contribution, but itis still very early in the financial year."
Chairman John Wilson said the lower forecast Farmgate Milk Pricereflected continuing volatility, with the GlobalDairyTrade price index declining 6 per cent in the past twotrading events.
“The market is currently influenced by strong milk production globally, theimpact of Russia’s ban on the importation of dairy products, and the levels ofinventory in China. Some relief has been provided by exchange rates, with theNZ dollar recently showing some signs of falling against the USdollar."
“Under the current market conditions, there is further downside risk. However, the forecast reflects expectations that prices will increase in themedium term,” Mr Wilson said.Chief Executive Theo Spierings said the estimated dividend range reflected thepositive impact of a lower forecast Farmgate Milk Price on product margins but also significantvolatility in commodity prices.
“A lower forecast Farmgate Milk Price reduces input costs in our consumer andfoodservice businesses. In turn, we do expect to deliver increased returns as aresult of a recovery in margins on our products.“In addition, stream returns for Non-Reference Commodity Products such ascheese and casein are currently making a positive earnings contribution, but itis still very early in the financial year."
