Farmers philosophical over payout cut

21:54, Sep 26 2012
farmer Roger Landers
EXPECTED: Fonterra dairy farmers have been hit with with a pay cut of more than $180,000 on last year but farmer Roger Landers said the announcement was in line with expectations.

Fonterra dairy farmers have been hit with with a pay cut of more than $180,000 on last year as the dairy giant posted its financial results for 2012.

While the world's dairy farmers produced a tsunami of milk during the year and Fonterra saw a record 11 per cent lift in its milk volumes, the glut had the effect of depressing international prices.

Combined with a $1 billion hit to earnings from the strong Kiwi dollar, New Zealand's biggest company turned in flat revenues of $19.8 billion and a 19 per cent dip in after tax profit.

The casualty was the final milk payout to farmers for 2012, which at $6.08 is $1.52kg milksolids less than they received for their final payout in the 2011 year.

For the average-production farmer this means around $183,000 less in the bank than last year.

The full final payout including dividend for this year is $6.40 with he company retaining 10 cents a share. It is a far cry from last year's $7.90.


Looking ahead, Taranaki farmers are hoping Fonterra can match this season's payout to the 2011-12 figure of $6.40 it announced yesterday.

However, Fonterra is forecasting a lower payout of just $5.25 kgMS this season.

Kaponga's Roger Landers said yesterday's announcement was in line with expectations.

"Most farmers would be happy with that result in 12 months time. But the strong dollar and market volatility make that a big ask."

Mr Landers said many farmers did not have much surplus in their budgets and the forecast put them under pressure. "This season's forecast keeps your feet on the ground. For a lot of people, it's at the break-even mark."

Taranaki Federated Farmers president Harvey Leach said the payout for last season was "okay" in relation to global conditions.

"We're happy because it's more than we anticipated - but it's all about next year now."

He said farmers should be cautious with their budget this season.

"The cows are producing well but pastures are getting short and production targets might not be met."

He and wife Lynette base their farm budget on the milk price.

"We don't build the dividend into our budget, so that gives us a buffer."

Mahoe dairy farmer and 2010 Taranaki Sharemilker of the Year Greg Topless was reasonably happy with $6.40kg.

Like Mr Landers, he hoped this season's payout would rise to match it.

John Lynskey, of Oeo, thought the payout was average, although it was about what he expected.

"But I'm confident for the long-term future of the industry."

Production on his farm was currently 22 per cent ahead of last season. "It's been the best 12 months farming that I can remember," he said.

"We just need to get this season's payout up."

Taranaki Federated Farmers sharemilkers chairman Michael Prankerd, of Hawera, said farmers were grateful for $6.40, given global volatility. Facing tough times, they wanted similar payouts in future.

Fonterra chairman Sir Henry van der Heyden said last season was one out of the box.

“All around the world, we saw record dairy production which was mirrored back here in New Zealand."

The decline in farmers' earnings was partly eased by the high volumes of milk they produced, although he acknowledged the lower milk price forecast was causing pain to many.

Taranaki Daily News