By ELLEN READ
Fonterra's farmers face an average $57,000 cut in revenue for the 2004-05 dairy season according to forecast payouts released by the dairy giant yesterday.
Chairman Henry van der Heyden announced that next season's (June-May) payout was expected to be $3.50 a kilogram of milksolids - with a likely variability
of 5 per cent up or down.
"We very, very much recognise that the number we're talking about is not ideal for farmers but let's not forget what Fonterra's actually charged to do and that's to maximise the payout and we will be doing everything we can within the business," he said.
He said the forecast - a 65c drop from the present season forecast - was being announced earlier than usual to counteract negative public sentiment that had stemmed from suggestions the next season's number (for 2005-06) might fall below $3.
Yesterday's announcement compares with Fonterra's actual payout of $3.60 for 2002-03 and its forecast payout for 2003-04 of $4.15 which it reiterated yesterday.
"We remain confident at $4.15 but are trying to quell any expectations above it," Fonterra chief executive Andrew Ferrier said.
The Fonterra board will finalise its budgets at the end of April and will update the forecasts then.
"It's early days yet with our budgets for 2005 not finalised and our forecast 2005 exposures not yet fully hedged. However we are in a position now to give farmers an indication of where we see the range," van der Heyden said.
Fonterra indicated last year that the weaker US dollar would have a big impact on payout for the 2004-05 season.
"Our forecasts are based on recently high prevailing exchange rates for the balance of our unhedged exposures," van der Heyden said.
While the level of the New Zealand dollar was a big influence on payout, commodity prices could have a greater bearing on next season's payout than exchange rates, he added.
And Fonterra's costs and its ability to increase its value-added earnings were equally strong influences on payout, he said.
"Early indications are that these factors will work to partially offset the total impact of currency on payout."
Van der Heyden said global demand and prices for dairy commodities were stable and were forecast to remain around current levels in the short to medium term.
