Westland lowers pay-out predictions

By Jim Cornall

- Last updated on GMT

Related tags Global dairy market Milk Dairy farmers

Westland is dropping its payout predictions for 2015-16.
Westland is dropping its payout predictions for 2015-16.
Westland Milk Products, New Zealand’s second biggest dairy co-operative, has announced a drop in its pay-out predictions for 2015-16, saying a forecast 15 to 25% reduction across all commodity products for the remainder of the season is the driving force behind the decision.

Chairman Matt O’Regan says the new predicted payout of $2.68-$2.87 (NZ$4.15 - NZ$4.45) per kilogram of milk solids is bad news for Westland’s shareholders but, given the state of the global dairy market, not unexpected.

The previous prediction was $3.16-$3.42 (NZ$4.90 to NZ$5.30). 

He says lower prices are expected to remain for this season and probably into the second half of 2016 – the beginning of the 2016-7 season.

“As farmers this is extremely unwelcome news,”​ O’Regan said.

“It reflects Westland’s view of what the market will deliver and we need to signal this to our shareholders so they can plan accordingly.”

US/Europe blamed for lower prices

The major global driver of downward prices, however, is the ongoing growth of milk supply in Europe and the USA, O’Regan says.

“Demand from China is steady, but well down on two seasons ago. Sanctions against Russia remain in place and limit large volumes of European dairy products entering this key consumption market.

“Dairy farmers in Europe are receiving above market prices for milk – due to processors over paying for milk as farmers adapt to the removal of quotas and find a new sustainable farm gate price – which has kept their production higher than expected.”

However, O’Regan says the recent lift of sanctions against Iran is good for Westland, which has butter contracts into that market. He adds that the market in China can also prove lucrative.

“With our ability to produce a higher proportion of added-value of nutritional products coming on stream, and our UHT milk plant almost ready to go, there remain good prospects for sales into China with products that return better profits back to shareholders,” ​he added.

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