The agency said the move was in response to weaker international dairy prices, but the co-operative’s chief financial officer Lukas Paravicini said it was taking steps to address those financial pressures.
That included reducing capital expenditure, the advanced payment to farmers to reflect global volatility and restructuring the business.
The advance rates announced for this season range are $2.20 kg milksolids (MS), plus 51c kg MS capacity adjustment, from August to September then $2.40 kg MS to $2.60 kg MS from October to January and $2.65 kg MS to $3.05 kg MS from January to July plus 51c kg MS capacity adjustment.
“Fonterra has taken proactive and positive steps to maintain the financial strength of the co-op. We have continued to exercise financial prudence and discipline in challenging times for dairy globally,” Paravicini said.
Debt levels were within expectations and reflected capital expenditure in processing, higher advance rates paid to farmers last season and investment in China.
Meanwhile, the growth of independent dairy processors in the South Island could see an end to Fonterra having to supply them milk.
Primary Industries Minister Nathan Guy said last season independent processors collected 22% of milk produced in the South Island, exceeding the 20% threshold under which the Government is to review the pro-competitive conditions of the Dairy Industry Restructuring Act.
Growth has been much slower in the North Island, with independents collecting just 9% of milk produced.
A spokesman for the minister said the Commerce Commission was already reviewing the state of competitiveness of the dairy industry and was to report back by the end of February.
The increasing milk volumes collected by independents was part of that review.
Fonterra operates seven processing plants in the South Island but faces competition from, among others large plants operated by Synlait, Westland and Oceania in Canterbury, Danone-owned Gardians (CRRT) in South Otago and Open Country Dairy in Southland.
Guy said that while competition for milk was increasing, the Government would next year need to consider whether to extend pro-competition provisions, provide transition to deregulation or a combination of both.
