Fonterra slashes 2014/15 milk price forecast for fourth time

By Mark ASTLEY contact

- Last updated on GMT

Fonterra also reduced its milk supply estimate for the 2014/15 season to 1.607bn kgMS (Image: Fonterra)
Fonterra also reduced its milk supply estimate for the 2014/15 season to 1.607bn kgMS (Image: Fonterra)

Related tags: Milk, Fonterra

Fonterra has slashed its farm gate milk price (FGMP) forecast for the 2014/15 season for the fourth time since May 2014.

New Zealand-based Fonterra today announced it had reduced its FGMP forecast from NZ$4.70 per kg of milk solids (kgMS) to NZ$4.50.

With an estimated dividend range of between NZ$0.20 and NZ$0.30 per share, its forecast cash payout currently stands at between NZ$4.70 and NZ$4.80.

It also lowered its milk supply estimate for the 2014/15 season from 1.616bn kgMS to 1.607bn kgMS.

Fonterra is required to consider its FGMP forecast each quarter under the Dairy Industry Restructuring Act (DIRA), the legislation that enabled its formation in 2009.

It announced an opening forecast FGMP of NZ$7.00 in May 2014 for the 2014/15, which began on June 1 2014.

It knocked a dollar off its estimate in July, then reduced it to NZ$5.30 in September 2014 and NZ$4.70 in December 2014.

Fonterra CEO, Theo Spierings, attributed its latest FGMP forecast decrease to unrest in Russia, the Middle East and North Africa.

"Remote as they are, events such as the flow of refugees from Libya to Europe come with factors like lower oil prices to soften dairy demand,"​ said Spierings.

John Wilson, chairman, Fonterra, acknowledged the impact today's FGMP forecast will have on its farmer owners. 

"This reduction will impact cash flows for our farmers, who will need to continue exercising caution with on-farm budgets,"​ said Wilson.

"Our farmers are already managing very tight cash flows. Although this reduction is no the news that anyone wants, it is important to keep our farmers update given the significant market uncertainty,"​ he added.

Related topics: Manufacturers, Fresh Milk, Fonterra

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