Westland forecasts record milksolids payout

17:15, Dec 19 2013

The West Coast's dairy co-operative is entering record territory with a new payout forecast up 30 cents to $7.90-$8.30 a kilogram of milksolids.

The predicted payout before retentions by the Hokitika-headquartered Westland Milk Products is nearing its highest payout of $8.29/kg in 2007-08. Westland is New Zealand's second-biggest dairy co-operative, shadowed by Fonterra and the third-largest dairy exporter.

Chief executive Rod Quin said the payout would be appreciated by the co-operative's shareholders on the West Coast and in Canterbury.

"Coming on top of a previous season where we experienced both drought and floods, farmers will welcome this boost in their income."

The payout prediction had been made possible by a strong outlook for milk prices and continuing high demand for the co-operative's products, especially infant formula for China, he said.

"Forecast pricing looks firm. But the New Zealand dollar is showing considerable volatility, which is why there is a 40c/kg range in the prediction," Quin said.

"International demand is still being driven by China but is strong across all key markets. Milk powders are still returning better than protein powders but the gap is closing."

Westland's milk production is up 16 per cent on the season so far compared to last year, but in line with budget.

The source of the increased milk flows includes new farms which have started to supply Westland from Canterbury.

Canterbury suppliers went from 14 in the 2012/13 season to 34 this season and their milk now provides 18 per cent of Westland's total volume.

The co-operative invested in a new nutritionals plant commissioned at the beginning of the year and this was now paying dividends for the company.

"Infant formula demand remains very strong, particularly in China, despite recent events," Quin said. "The Chinese Government continues to push for consolidation in their domestic supply base and new registrations are required for importers.

"But Westland is well positioned to work within these new rules and take advantage of the surging demand, thanks to our relatively high milk growth and the wider range of product options we have available as a result of our investments in recent years."

Federated Farmers West Coast dairy chairman Richard Reynolds said the new forecast would give farmers something to cheer about.

"Dairy farmers have had Christmas early this year with this payout announcement," Reynolds said.

"This is a huge difference from last year's payout and I know a lot of dairy farmers on the West Coast will be ecstatic."

Farmers were entering the new year on a good season so far and the promising payout would provide them with the opportunity to pay down debt largely taken on from the drought and floods last year, Reynolds said. "Thankfully, this year it has been a bumper season, which with this payout will put farmers in a good position going forward.

"Farmers need to budget sensibly allowing for any surprises next year and their tax bill."