Dairy Sector: Milk payment hike points to enduring recovery in prices
May 10th, 2010
Fonterra, as expected, has raised its forecast milk fat payment and more heartening, chairman Henry van der Heyden has advised farmers to assume a similar payout in 2011. The increase amounts to an additional $1.6bn of income in the hands of farmers, who stand to get a total $8.8bn payout for the 2009/10 season. While the co-operative will prepare a formal forecast next month, it has already pointed to the auspicious line up of conditions in global markets. Van der Hayden says the supply/demand balance “has shifted to a slight supply deficit.” Fonterra is also seeing increasing demand in the Middle East, North Africa and Asia. At the same time, global milk production has continued to slow.
Encouragingly, dairy products helped supercharge NZ’s export sales last month, pushing the total value of monthly exports to more than $4bn for only the second time on record. Shipments of milk powder, butter and cheese jumped 19% to $969m from a year earlier and made up 23% of the value of annual exports. Fonterra’s 40 cents-a-kilo-of-milk solids increase in forecast pay out to $6.10 may not fuel a spending spree though. Goldman Sachs JBWere economist Philip Borkin says drought’s impact on production and winter feed costs will prompt many farmers to be conservative, pay off debt and reinvest into their farms.
Copyright © The Main Report Group - NZ AGri-Business
