Combined with the earnings per share range of 45-55 cents, the total available for payout of $4.60-$4.70 per kg would currently equate to a forecast cash payout of $4.50-$4.55 per kg for farmers, it said.
Chairman John Wilson said global economic conditions continue to be challenging and are impacting demand for a range of commodities, including dairy.
«Key factors driving dairy demand are declining international oil prices which have weakened the spending power of countries reliant on oil revenues, economic uncertainty in developing economies and a slow recovery of dairy imports into China,» he said in a statement.
In addition, the Russian ban on European Union dairy imports continued to push more product on to the world market, Wilson said.
ASB Bank said in a commentary that Fonterra’s move to $4.15 was in line with its expectations. «However, our long-run dairy view remains positive,» the bank said. «Current low prices are unsustainable and, as producers respond to low prices in earnest, prices will lift over the year,» it said.
The bank said it expected the milk price to lift to $6.50/kg next season.
The Fonterra Shareholders’ Council said the co-operative’s 45c cut in its farmgate milk price for 2015/6 was a «sobering blow» for farmers.
Council chairman, Duncan Coull, said the cut in the farmgate Milk Price, from $4.60 kg/MS to $4.15 kg would «further amplify» the effects of the current low milk price environment on Farmers and their businesses.
Farmers are very aware that this is a global story which is now having a significant local effect.
DairyNZ estimates break-even point for farmers to be at $5.40 a kg of milksolids and today’s announcement means farmers are likely to face two consecutive years of sub-$5 prices.
Source: NZHerald
