Good reason for optimism in dairying

Dairy farmers are going into the new season with a high level of optimism. This is due to the extremely mild winter and the unchanged opening forecast payout from Fonterra.

Good autumn growing conditions meant most dairy farms went into the winter with good pasture covers and cows in good condition.

Covers at the start of calving in August around South Canterbury were high and some farmers had to bring their cows back earlier from winter grazing to keep pasture levels under control, Federated Farmers South Canterbury dairy chairman Ryan O'Sullivan said.

August was a settled month apart from the snowstorm with plenty of fine days that allowed good pasture growth on paddocks, he said.

There was relief among farmers that Fonterra did not change its opening forecast payout for the 2011-2012 season at $7.15-$7.25/kg milk solids before retentions.

He was also buoyed by the latest result of Fonterra's online auction, despite a 1.4 per cent dip in average price.

The payout includes a forecast milk price of $6.75/kg milk solids and forecast distributable profit range of $0.40-$0.50 cents per share.

After winter and towards the end of calving dairy farmers can now sit down and crack a smile, Federated Farmers Dairy vice-chairman Robin Barkla says.

"This will definitely give farmers and their families a boost as the new season's production starts to ramp up."

Fonterra chairman Sir Henry van der Heyden said the board had reconfirmed the forecast against a background of significant volatility in global markets and foreign exchange rates.

The recent fall in food commodity prices was largely anticipated when Fonterra announced its opening forecast for 2011-2012, he said.

"In volatile economic and market conditions we could face a range of factors that may affect the season's milk price. But at this very early stage of the season we see no reason to alter the forecast.

"We will continue to monitor possible slowing global economic growth that might translate into weaker dairy demand."

The payout meant farmers could keep their budgets on track but Federated Farmers still advises a degree of conservatism, Mr Barkla said.

"Our overall advice is to run conservative budgets in order to bank the gains later."