POSITIVE: Dargaville dairy farmer Colin Hadlow says a $8.40 payout is still good; and Whangarei farmer Charmaine O'Shea (inset) agrees.PHOTO/FILE
POSITIVE: Dargaville dairy farmer Colin Hadlow says a $8.40 payout is still good; and Whangarei farmer Charmaine O'Shea (inset) agrees.PHOTO/FILE
Northland dairy farmers have reacted calmly to Fonterra reducing its forecast milk payout this season to $8.40 a kilogram of milksolids - down 25c on the record $8.65 kgMS announced three months ago.
With Northland's 1000 dairy farmers producing an average 100,000kgMS each, the 25c payout reduction will lower theirincomes by $25,000 to an estimated $840,000 each and reduce the region's dairy income for the season by $25million to $840million.
The 25c payout reduction will not mean any revision to the June payment of the advance rate. The 25c net reduction will be spread over the July-to-October payments.
The payout trim on Wednesday came with news the opening forecast milk price for the 2014/15 season is $7kgMS, matching the opening forecast 12 months ago at the start of the 2013/14 season.
Fonterra is forecasting milk supply for the new season of 1616millionkgMS - up 2 per cent on the current season forecast of 1584millionkgMS.
The co-operative's chief executive, Theo Spierings, said dairy commodity prices had fallen about 22 per cent from a peak in February. Meanwhile, the exchange rate had moved from NZD/USD 0.835 to sit above NZD/USD 0.855 for most of the past two months, he said.
Colin Hadlow, who spent about $100,000 a month feeding the 700 cattle on his drought-hit 400ha coastal dairy farm southwest of Dargaville, said he could handle the 25c forecast milk price reduction.
"The payout is still good at $8.40 - we can't complain," he said, happy the milk price forecasts were not reducing advance payments which would slash monthly income.
Whangarei dairy farmer and accountant Charmaine O'Shea said "volatility in payout" had become part of dairy farmers' vocabulary over the past seven years so she didn't believe there would be a huge surprise in Wednesday's announcement.
"A milk price of $8.40/kgMS still represents a record payout and, coupled with record production in most parts of Northland (West Coast excluded), this is very positive for the Northland economy," she said.
"A forecast milk price of $7kgMS for 2014/15, while a substantial fall from the current season, is still historically strong and is the fourth highest on record. I believe farmers were already factoring a decrease into their 2014/15 budgets so they will be very prepared for this."
