The decline in milk prices has made its presence felt in Landcorp’s operating earnings forecast for the 2014/15 June year.
The state-owned farm owner, which is also the country’s biggest corporate farmer, said it now expects a profit of between $1 million and $6 million, down from its previous forecast of $8m to $12m.
«This reflects the recent downward revision in Fonterra’s forecast milk payment to $5.30 per kg of milk solids (from $6.00) and the potential for further softening in milk payouts,» Landcorp said in a statement.
Landcorp said its forecast assumed there would be be no adverse weather conditions, a deterioration in the currency market, or in market prices.
«The fall in milk prices illustrates the extent to which New Zealand agriculture is vulnerable to the vagaries of the global market,» chief financial officer Steven McJorrow said.
«We’re well versed in managing our business through commodity price cycles and very comfortable that we can handle the current fluctuations in milk prices,» he said in a statement.
Landcorp’s updated forecast compares with a net operating profit of $30 million for the year to June 2014, which was up from $13m in the previous year.
The growth in that year’s revenue reflected a recovery in prices as favourable weather boosted production volumes for dairy, sheep and beef products.
Landcorp’s expansion of dairy production across the country combined with record milk solid prices contributed to the strong performance in that year.
The company owns or manages 137 dairy, beef, sheep and deer farms from the Far North to Southland.
Landcorp farms produce around 18,000 tonnes of milk solids, 10,000 tonnes of sheep meat, 10,000 tonnes of beef, 3,500 tonnes of wool, 2,500 tonnes of venison and 8 tonnes of velvet a year.
Source: NZHerald