Fonterra urged to have clearer forecast

Te Puke Young Farmers Club chairman Luther Siemelink says the banks would have to carry some farmers for a few years following falling dairy prices. Photo / John Borren

Bay dairy farmers are calling for Fonterra to front up with a "a bottom line" forecast tomorrow, to ease uncertainty in the industry after another dramatic drop in global dairy auction prices.

However, business leaders in the Western Bay of Plenty say the economy "is more diverse than other regions and is performing strongly" on the back of booming kiwifruit, avocado and building sectors.

ANZ's commodity price index fell earlier this week to 11.2 per cent, its steepest monthly decline, to a six-year low.

The dairy sub index plunged 23.1 per cent to its lowest for 11 years, as whole milk powder prices fell 35 per cent and skim milk powder 11 per cent.

Te Puke dairy farmer John Scrimgeour said Fonterra needed to use more clarity with its projections.

"I want clarity because what has happened is Fonterra appears to have given price signals that are assuming an upturn in the market at some future point. Then they have had to keep postponing that ... as prices continued to sink."

He estimated its forecast should drop to about $4kg of milk solids or less but it was "a waiting game".

There were a lot of families under pressure and doing it tough, he said.

Bay of Plenty Rural Support Trust chairman Derek Spratt said farmers had adopted a "grin and bear it" attitude.

Farmers expected Fonterra to cut its forecast milk payout but it was all about the bottom line so they could prepare, he said.

Dairy NZ Economic Group has also indicated up to a 3 per cent drop in milk production this season as farmers tighten the focus on improving the efficiency of their farming systems.

The Bay of Plenty Times reported last month farm debt in the Bay was expected to skyrocket as properties ran at a loss as more farmers were forced to borrow money off banks.

Te Puke Young Farmers Club chairman and first-year sharemilker Luther Siemelink said the banks would have to carry some farmers for a few years.

"It's a career for us not a money-making endeavour and we will do our best to make this year work."

Fonterra managing director co-operative affairs Miles Hurrell said the forecast milk price is determined after consulting a range of supply, demand, market and currency information.

"We aim to provide an accurate forecast so our farmers have the clarity with which to manage their businesses.

"We are operating in a volatile dairy market and it's important we look at our business model and become more efficient. Reducing the number of roles in our business isn't about individual competency; it is about continually improving the way we deliver performance."

Tauranga Chamber of Commerce chief executive Stan Gregec said the mood in the Bay was still positive despite the dairy cloud. "Apart from some impact on spending and investment for dairy-related products and services, which affects suppliers to this sector, I expect that business conditions will continue to be strongly positive here. We are seeing good growth and strong performance across many other sectors."

Priority One chief executive Andrew Corker said from a national perspective the latest drop in dairy price was concerning and the region would not escape all of the fallout.

"We will see some impact in our rural service communities but the Western Bay of Plenty's economy is more diverse than other regions and is performing very strongly, and I believe that business and consumer confidence at a local level reflects the level of buoyancy."

Last month Zespri announced $1.5 billion in sales for the 2014/15 season, up 16 per cent.

Zespri chief operating officer Simon Limmer said it was looking ahead to strong growth this season.

Fonterra forecast

* The Fonterra Board will discuss a range of things during its board meeting tomorrow.

* A review of the forecast milk price will be one.

* The meeting is expected to break at 2pm, after it will be able to make an announcement.

* The current forecast was $5.25kg of milk solids.

- Source Fonterra