FSF
28/05/2014 08:37
FORECAST
REL: 0837 HRS Fonterra Shareholders' Fund (NS)
FORECAST: FSF: Fonterra New Season Forecast Farmgate Milk Price
2014/15 season opening forecast Farmgate Milk Price
Fonterra Co-operative Group Limited today announced an opening forecast
Farmgate Milk Price of $7.00 per kgMS for the 2014/15 season - matching the
opening forecast provided 12 months ago at the start of the 2013/14 season.
The forecast Cash Payout - which comprises the Forecast Farmgate Milk Price
and dividend for the 2014/15 season - will be announced in July when
Fonterra's budget is completed and approved.
The Co-operative is forecasting milk supply for the new season of 1,616
million kgMS - up 2 per cent on the current season forecast of 1,584 million
kgMS.
Chairman John Wilson said the new season Farmgate Milk Price forecast
remained historically high, matching the Co-operative's opening price of the
previous season, but also reflecting current market conditions.
"Our farmers understand the realities of dairy commodity price cycles, and
will exercise caution at this early stage in the season," he said.
Chief Executive Theo Spierings said the shift in supply and demand over the
past few months showed that volatility continued to exert a strong influence
over the global outlook for dairy.
"Dairy commodity prices have come off the peak reached in early February
this year, as global supply and demand have rebalanced.
"There is currently more milk available for the international market to
absorb. We expect demand from China to remain strong. In Russia, there will
be pressure on the balance between imports and local production. These
factors are expected to continue influencing the supply-demand balance," said
Mr Spierings.
Revised 2013/14 Forecast
The Co-operative also confirmed today that it is reducing its current
forecast Farmgate Milk Price for the 2013/14 season to $8.40 per kgMS. Along
with a reconfirmed forecast dividend of 10 cents per share, the change
amounts to a forecast Cash Payout of $8.50 for a fully shared-up farmer.
Chairman John Wilson said that when the last forecast was made in late
February, the forecast Farmgate Milk Price derived under the Milk Price
Manual was $9.35. The Milk Price Manual calculation is now 40 cents lower at
$8.95.
"When we announced the last forecast Farmgate Milk Price, it was 70 cents per
kgMS below the then Milk Price Manual calculation. We made that decision to
protect the Co-operative.
"After seeing recent improved stream returns on powders and other products,
and considering the level of risk likely in the remaining three months of the
financial year, the Board has decided to reduce that 70 cent gap by 15 cents,
to 55 cents.
"That is why today's forecast Farmgate Milk Price amounts to a 25 cent net
reduction from $8.65 to $8.40," he said.
Chief Executive Theo Spierings said volatility remained an issue. The revised
forecast reflects the recent fall in global dairy commodity prices, as well
as the impact of currency movements.
"Our previous guidance on the earnings range remains unchanged.
"GlobalDairyTrade (GDT) prices have tracked down in recent events, with the
GDT price index down more than 22 per cent since a peak on February 4, 2014.
Since that date, prices for whole milk powder on GDT have decreased by 22 per
cent, while skim milk powder prices are down 23 per cent.
"Despite the weaker auction results, the New Zealand dollar has remained
firm. The exchange rate has moved from NZD/USD 0.835 to sit above NZD/USD
0.855 for the majority of the last two months," said Mr Spierings.
The forecast Farmgate Milk Price change for the current season will not mean
any revision to the June payment of the Advance Rate Schedule. The 25 cent
net reduction will be spread over the July to October payments.
Note: currency is New Zealand dollars unless otherwise stated.
End CA:00250947 For:FSF Type:FORECAST Time:2014-05-28 08:37:38
