Westland revises payment down, predicts two more seasons of pain
Westland Milk Products payout prediction has been revised down to $3.90-4.00 a kilogram of milksolids, and chief executive Rod Quin has forecast the pain of tough times could last another two seasons.
Last month's prediction for West Coast dairy farmers was for $4.00-4.10.
Quin's outlook is at odds with that of Fonterra CEO Theo Spierings, who last week forecast that prices would lift later this year.
"All the indications would point to Rod Quin being right and Theo Spierings being wrong. Perhaps we're losing the wrong chief executive from the dairy industry," Labour Primary Industries spokesman Damien O'Connor said.
In February Quin announced his resignation from Westland after seven years in the job.
Quin said the major driver of the revised payout remains the global oversupply of milk, compounded by the aggressive approach of the European dairy market.
Quin and Westland chairman Matt O'Regan have recently returned from Europe where they met with customers, farmers, processors, traders and industry advocates.
"The clear and consistent message we received is that European milk growth will be higher and more aggressively promoted by European farmers and processors than expected, both within Europe and, more concerning to New Zealand, the international markets.
"The effect of this is likely to be a longer time frame for the downturn in prices; expected for another two seasons. This will lead to relatively lower payouts and a resulting impact on New Zealand dairy farmers," Quin said.
European farmers were benefiting from low debt levels and fewer environmental pressures.
Even if the sanctions against Russia were lifted, there would be little increase in demand as consumers there have shifted to cheaper cheese alternatives, while incomes for many Russians have been hit by lower oil prices.
Quin called for a return to low cost, pasture-based farming.
"During our meetings in Europe we noted several examples of where high quality, added value marketers were still doing well and this reinforces Westland's strategy to continue to move away from bulk commodities into added value, high end products."
Westland processes 3.5 per cent of New Zealand milk supply. It produces infant formula and UHT milk.
Meanwhile Labour's Economic Development spokesman David Clark said the Westpac NZ regional economic confidence survey showed some regions heading into recession.
"In the December to March quarter economic confidence in Waikato fell 18 per cent to -14 per cent; in Taranaki/Manawatu-Whanganui it plunged 31 per cent to -22 per cent and in Southland it dropped a whopping 38 per cent to -22 per cent.
"Those are terrible numbers and will be a deep concern to everyone trying to make a living in those areas," Clark said.