Tuesday, March 19, 2024

Advance rate cut then restored

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Fonterra’s revised advance rate schedule will deduct 15c/kg from farmers’ payments in January and then restore it in February. It will reduce the December-paid January payment from $4.15 to $4.
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The cash flow impact on the average supply farm will be $2500 for December milk plus a deduction of 15c/kg for milksolids supplied June to November inclusive that had already been paid at $4.15 in October, November, and December.

One accountant’s estimate of the impact was $8000 in the full season’s revenue of around $900,000 based on the current forecast of $6-$6.30.

But it is about 12% of the anticipated January payment of around $70,000.

Farmers have complained the reduction was badly timed because of tax and share purchase obligations.

They were puzzled why Fonterra had to reduce the January payment level only to restore it again the following month.

The company said that as a result of the forecast farmgate milk price being lowered farmers had already been paid a higher proportion of their payout than normal at this stage of the season.

“Our strong relationships with our financial partners are based on being consistent with our financial discipline guidelines wherever possible, including the percentages in the advance rates. 

“This is not a cashflow issue and is unrelated to our current financial performance.”

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