Farmers hail forecast but urge caution
South Canterbury dairy farmers are rejoicing over three healthy Fonterra payout forecasts in two months but remain cautious over market volatility.
A 50-cent increase per kilogram of milksolids follows a 30c rise on August 27 and a 50c hike on August 1.
The latest increase takes the forecast payout to a record $8.30 with a likely cash payout of $8.62 when coupled with an unchanged dividend of 32c a share.
Leighton Pye runs 8000 cows on 2000 hectares in Mid and South Canterbury. He said the announcement was great news for Fonterra farmers but the money was not in the bank yet.
"We need to remember the past season payout has only been finalised at $5.84; we need to use this season's record forecast to put our businesses in a strong position to weather any storms in future years," Mr Pye said. Debt and tax were priorities, he said.
John Gregan runs 1000 cows on 500ha near Hunter.
He said farmers had been told milk prices would come down and interest rates would go up.
"It's only a forecast at this stage; there's been huge volatility in the past three to four years.
"It's encouraging at this time and we have to make hay while the sun shines."
South Canterbury Federated Farmers dairy chairman Ryan O'Sullivan said there would likely be enough fallout to allocate money towards debt reduction and some discretionary spending. "The other big thing people are going to run into is tax; when they've got a lot of volatility, tax can be hard to manage.
"If we don't have a high payout next year, then we will still have the tax to pay and no cash to do it.
"Tax still needs to be provisioned; farmers need to talk to their accountants and start making higher provisional payments than they normally would."
South Canterbury Chamber of Commerce president Tony Howey said South Canterbury was in a strong position.
"Agriculture is such a dominant force in New Zealand, particularly in South Canterbury.
"The export sector is such a dominant part of the economy and as a proportion of the provincial economy it's substantially more than that," he said.
"Generally speaking, if agriculture is doing well then the community is doing well."
- © Fairfax NZ News