Early warning of advance milk payment urged

The Fonterra Shareholders Council has asked the dairy company to bring forward its announcement date of the new season's advance milk payment to help farmers budget as the milk price outlook worsens.
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It has been estimated around $2 billion in additional working capital will now be needed by farm businesses to fund farming operations for the 2015-2016 season due to Fonterra’s 20c a kg of milksolids forecast downgrade last week.
Council chairman Ian Brown was to ask if an early advance notification was possible at a scheduled meeting about milk pricing and milk price signals with company farmer-director John Monaghan and Fonterra management on Friday.
The company normally announces later in May the opening milk price forecast and advance rate for the new season starting June 1.
The call for an early new season advance price notification was made by Federated Farmers dairy chairman Andrew Hoggard.
Brown said he did not know if it was possible to get an earlier forecast but it would be a «huge confidence booster» to farmers trying to budget.
Fonterra last week downgraded its milk price forecast for the current season to $4.50 a kg of milksolids from $4.70, a payment level already below the cost of production for some farmers.
Brown said councillors would reinforce the message to the company that it needed to «be out there as soon as possible with numbers».
At a milk price of $4.50 farmers would need an additional $36,000 working capital per farm this coming season, said agricultural consultant Will Wilson of Wilson Consultancy.
This impact was on top of around $140,000 that would not be available in final payments compared to last year, he said.
«In total it will amount to around $2 billion, as a minimum, in additional working capital required by farm businesses to fund their businesses for the 2015-2016 season.  This additional working capital requirement is additional to the cash losses many farms would have generated from the current season.»
Wilson said it was not the time to blame and shame the farmer co-operative, but Fonterra needed to «start being realistic» about the pressures on world dairy prices and respond accordingly.
He said it was «bizarre» for the company to mention the flow of refugees from Libya to Europe in explaining reasons for its latest forecast downgrade when the impact on international prices was much more complex and related to such effects as changes in European milk quotas, international grain prices and world inventory levels, to name a few.
«Surely the marketing and analytical expertise within Fonterra has the capability to consider the significance of these market variables with some degree of objectivity and be in a position to advise its stakeholders accordingly.
«Certainly, independent economic analysts have been much more realistic and on the mark to date.»
Council chairman Brown did not agree with industry comment that Fonterra leaders would have known a further forecast downgrade would be necessary at the time of the company’s poor half -year financial results and following round of meetings with farmer-shareholders, and should have told farmers at that time.
«I wanted them sweating to make the $4.70 for as long as possible rather than come with a lower number and then back off,» Brown said.
Fonterra group director co-operative affairs Miles Hurrell said since the half-year result and round of farmer meetings, prices had fallen at two Global Dairy Trade auctions. Prices for wholemilk powder, New Zealand’s main dairy export, had fallen by 13.3 per cent and 4.3 per cent respectively.
Brown said with the severe turnaround in milk price from last year, farmers were talking a lot about how some of New Zealand’s farm systems and practices were less resilient to payout fluctuations than they used to be.
«Given the milk price should be the signal whether to increase production by a litre then you need to have systems that can cope with fluctuations that will come. The move away from that hasn’t helped because there’s nowhere to go when the price does what it has this year for some people.
«Some will have to look at how they operate their farms, how they are structured, how much debt they have and their ability to change the system to cope with fluctuations.»
The council had learned some farmers were setting up their farm systems for a $3kg cost of production, Brown said.
«Some farmers have adapted. Those farmers are dry today, they’ve dried off earlier to prepare for next year. They’re not buying feed, they’re getting their cows fat and setting up their pastures.
«So there are two sides to the coin. On-farm systems have to be resilient to prices.»
 

 Source: Stuff

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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