In late December Tatua was leading the way with a payout forecast of $6.50/kg MS, with the country’s second largest dairy co-op Westland Milk Products heading off the other players, including Fonterra, with a forecast of $5-$5.40/kg MS.
Synlait remained at $5/kg MS but at its annual meeting late last year said the next payout revision would happen in January.
Oceania Dairy, in South Canterbury, and Miraka in the central North Island have linked their prices to Fonterra offering 10c more than Fonterra’s milk price.
Open Country Dairy has three tranches of payments though the season which give a milk price range of $4.50 – $4.80/kg MS.
AgriHQ dairy analyst Susan Kilsby said despite the slight firming of WMP prices at the last GDT auction for 2014 the AgriHQ Farmgate Milk Price Calculator still put the 2014-15 milk price at $4.20/kg MS well below Fonterra’s milk price.
Kilsby said Fonterra had factored in a WMP price of US$3000/tonne by April but the NZX Dairy Futures market had prices for that month at US$2500/t.
Average winning WMP prices on GDT for future-dated contracts out to June also showed prices only rising to $2459/t.
“We’re going to have to see a big turn around in global prices very quickly,” Kilsby said.
“The spot price on our snapshot calculator, which gives a farmgate milk price based on today’s commodity prices is $3.88/kg MS, and that would have to come up over $5/kg MS to make an overall season milk price of $4.70/kg MS likely.”
Fonterra revealed where it believed commodity prices would head at farmer networker meetings in December but Kilsby said Fonterra’s view appeared optimistic when compared graphically with the NZX Dairy Futures forward price curve.
Fonterra chairman John Wilson said the $4.70/kg MS forecast was based on extensive reporting from within Fonterra’s own teams around the world and he was confident in it, but he too warned the current climate was uncertain.
Dairy company payout forecasts for 2014-15
He acknowledged more product was being sold off GDT this season and said if the product was sold on a GDT-like basis by Fonterra’s own sales team it would be included in the milk price.
However, where Fonterra met special customer conditions any premium over GDT prices would fall into the profit portion of what makes up payout.
The dividend had been left unchanged until the interim results, when more information would be available from Fonterra’s value added operations.
Meanwhile, DairyNZ calculated that at $4.70/kg MS 20-25% of the country’s farmers would be in the red once farm working expenses, interest and rent payments were made.
DairyNZ senior economist Matthew Newman said the calculations took into account milk and livestock income and included washup payments from last season’s record payout.
Those retrospective payments accounted for $1.50/kg MS.
“The big concern is if we don’t see a marked improvement in next season’s payout. At the moment, based on Fonterra’s advance there’s only 55c of retro payments going into next season,” he said.
Kilsby said AgriHQ (formerly Agrifax) was now predicting a milk price for next season of $6.40/kg MS based on a WMP price of US$3300/t and an average exchange rate of US74c.
