Fonterra’s opening season milk price included an interest deduction of two cents a kg/ms, applied from the start of the season, covering loans offered to farmers as a result of the May 2016 milk price adjustment.
“As fewer loans were taken out than expected (44% of suppliers), the interest deduction has been adjusted to 0.85 of 1 cent (one cent),” a spokeswoman said.
“The farmgate milk price will increase by 1.15c kg/ms and will be adjusted with future price revisions.”
Fonterra’s opening season milk price included an interest deduction of 2c/kgMS applied from the start of the season (01 July 2016) relating to loans offered to suppliers as a result of the May 2016 milk price adjustment.
In April, Fonterra announced it had cut the average farmgate price from $5.60 to $5kg/ms, backdated to the beginning of the financial year.
It offered farmers a support loan, repayable over three years, from 2018.
A Fonterra spokeswoman said last week, the $0.02 kg/ms rate for the season was “under review, now we understand the total loan value.”
Fonterra’s milk supply manager Matt Watt said contrary to some reports, no Fonterra farmers were being asked to return money already paid to them in season 2015/16.
“As part of our support loan, the base rate for our milk price this season has been reduced by $0.02 kg/ms and is subject to review.
“This is applicable across the entire supplier base, and covers the interest payable on the loan, regardless of whether suppliers elected to take up a support loan.
“Our base rates will not be impacted next season.”
Western Victorian Fonterrra suppliers reacted angrily to the New Zealand company’s annual results, showing a net profit of NZ $834 million.
The co-operative’s profit was up 65 per cent, prompting Fonterra to raise its forecast milk payout for its New Zealand suppliers for the second time in a month.
Swan Marsh farmer Brett Craig said he was still seeking answers on the loan, which he had never taken out.
“I see they are going to reduce the total payable, to those who opted for loan, but there is no comment on those who opted for a lump sum in cash, to be part refunded.”
He said he was concerned about Fonterra taking money out of milk payments but not informing producers.
And another Fonterra supplier, Crossley dairy farmer Karrinjeet Singh-Mahil, said an offset payment of $2.50 kg/ms for may and June milk production had a 90-day payment, “to stop anyone taking the money and running.
Fonterra suppliers were offered a loan to bring their milk price back up to $5.60.
“Even if you didn’t take the loan, you are obliged to pay the interest on it as the base rate for our milk price this season has been reduced by $0.02 kg/ms,” Ms Singh-Mahil said.
“This is not a choice as to how you deal with the dire financial situation Fonterra put you in, it is being taken from our milk pay right now.
“None of this is itemized on our milk statements. Quite beyond all the money-grabbing, where is the transparency in what we are paid and what has been taken out?”
Mr Watt said it was important both farmers and the processor had a model, which ensured sustainable profitability.
“Only a strong business can deliver a strong milk price, and the progress we are making on our turnaround will underpin our ability to deliver a sustainable, competitive milk price,” he said.
Fonterra Group’s profit announcement reflected the global result for all businesses.
“After three years of turnaround, and two years of substantial losses, the Australian business is now ‘back in the black,” Mr Watt said.
“The return to profit for the Australian business has largely benefited from one-off divestments, operational improvements and overhead savings, and the milk price revision helped to reduce our losses by bringing our farmgate milk price into line with global dairy markets.”
Source: Stockland
Link: http://www.stockandland.com.au/story/4202247/fonterra-cuts-loan-repayments/?cs=4786