Fonterra forecast boost for Sth Canty
AL WILLIAMS AND ESTHER ASHBY-COVENTRY
South Canterbury dairy farmers will be an average of $243,000 each better off, thanks to two Fonterra payout forecast increases in a month.
A 30-cent increase per kilogram of milksolids announced by Fonterra yesterday will bring in an extra $91,000 for the average herd, after a 50c rise on August 1, which delivered an extra $152,000 per herd.
The 30c increase takes the Fonterra payout to $7.80, its highest farmgate milk price forecast.
The previous top payout was in the 2010-2011 year, when it reached a record-breaking $7.60.
Fonterra is required to consider its farmgate milk price every quarter as a condition of the Dairy Industry Restructuring Act.
For the average South Canterbury dairy herd of 780 cows, and 390 kilograms of milksolids per cow, income will be $2.37 million, compared with $2.12m at the beginning of the month.
The two increases mean an extra $60m coming into the South Canterbury economy.
South Canterbury Federated farmers dairy chairman Ryan O'Sullivan said it was great news but he did not expect it to encourage more dairy conversions in the district.
"This is only one year and usually a higher rate is typically followed by a lower one," Mr O'Sullivan said.
Higher prices led to extra production from other milk-producing countries, often leading to oversupply and prices falling.
"South Canterbury province has a lot of its economy based on agriculture so if agriculture is doing well, then South Canterbury does well," he said.
Fonterra chairman John Wilson said the higher forecast farmgate milk price reflected continuing strong international prices for dairy.
"Current market views support commodity prices remaining at historically high levels longer than previously forecast.
"The two most recent GDT [GlobalDairyTrade] events have seen prices hold, and significant volumes sold.
"These factors have contributed to our updated forecast," Mr Wilson said.
At this early stage in the season, however, Mr Wilson said there were some uncertainties - and that was why there would be no change to the current advance rate announced in July.
"We will provide an update on business performance when we announce our annual result on 25 September 2013," Mr Wilson said. Fairfax NZ
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