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Fonterra Reduces Forecast Farmgate Prices

08 March 2016

New ZEALAND - The announcement by Fonterra of a reforecast Farmgate Milk Price for the 2015/16 season from $4.15 per kgMS to $3.90 per kgMS will lump more pressure on dairy farmers who will now be counting down the days to end of the season, according to Federated Farmers Dairy Industry Chair Andrew Hoggard.

“More and more farmers will be really feeling the pressure. This cut, which was not unexpected given the string of low auction prices, means we need to be even more pro-active around budgeting and scenario planning, and make the most of the support available from DairyNZ, accountants and farm advisors."

Fonterra said it is forecasting its New Zealand milk production to be at least 4 per cent lower than last season as New Zealand farmers respond to the ongoing low prices by reducing herd size and feeding significantly less supplementary feed which is expected to have an impact on this Autumn’s production.

Chairman John Wilson said difficult conditions in the globally traded dairy market have put further pressure on the forecast.

“This further reduction in the forecast Farmgate Milk Price is the last thing farmers want to hear in what is proving to be a very challenging season. At times like this the business needs to do everything it can to drive every last cent back to farmers.

“Management is fully focused on reducing cost and generating cash right across the business. The continuing lift in financial performance and our balance sheet strength will provide opportunities to support our farmers’ cash flows. We will provide an update on this at our interim results on March 23,” said Mr Wilson.

Federated Farmers and DairyNZ will this week commence a series of six regional meetings for sharemilkers and their farm owners. Sharemilkers, particularly those who do not own their herd, are the most vulnerable in the current market conditions.

"Our message to these guys is to stay the course if you possibly can. Some flexibility from farm owners can go a long way, so getting both groups in one room to talk through the options can only be a good thing," said Mr Hoggard.

Mr Hoggard is also calling for the Reserve Bank to cut the Official Cash Rate this Thursday.

“There are already plenty of reasons for the Reserve Bank to cut the OCR. This is another one.

"Anything that can ease the pressure on farmers' bottom line will help get as many dairy farmers as possible through the current season. There will be a new level of resilience that comes out of what we're experiencing, but that will be lost if farmers are forced out of the industry. Economic factors support a cut in the Official Cash Rate and that would be a welcome boost after today's news."

TheCattleSite News Desk



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