Open Country Dairy cuts milk payout below Fonterra's forecast

Open Country's revision comes ahead of a GlobalDairyTrade auction on Tuesday in the US. Photo / Sarah Ivey

Open Country Dairy, New Zealand's second largest dairy processor, has reduced its milk payout by 30 cents to an average price of between $4.00-$4.30 per kilogramme of milk solids.

Chairman Laurie Margrain told BusinessDesk the revision reflected the company's view on the market at present, and that suppliers were notified last week. In September, Fonterra lifted its forecast total payout for the 2015/16 season by 75 cents to $4.60/kgMS, and affirmed that view in December.

ANZ Bank New Zealand expects Fonterra to reduce its 2015/16 milk price forecast and thinks it will come in at the bottom end of a price range of $4.25-$4.50/kgMS. In an economic note to clients, ANZ said the move by Open Country highlighted the direction of risk in the industry.

It expects Fonterra's price to be close to $4/kgMS by the end of 2016.

Open Country's revision comes ahead of a GlobalDairyTrade auction on Tuesday in the US, which is expected to show a small decline, as indicated by weaker whole milk powder and skim milk powder prices on the NZX futures market, according to OMF dealer Michael Peters.