Board pencils payout in record books

By Philippa Stevenson

The Dairy Board has announced an end-of-year payout for the record books - but only because it could be the last one it ever makes.

Yesterday, chief executive Warren Larsen said the board, which could be superseded by a mega co-op by this time next year, would pay $3.25 per kilogram of milksolids for the 1998/99 season.

Last year it paid $3, and at the start of the season last June forecast a final base payout between $3.15 and $3.30.

Mr Larsen said the figure, which farmers will get with a top-up dependent on individual dairy company performance, had come after a very tough international trading year.

"This level of payout is not adequate in terms of where we would like it to be, but it does reflect the international market. We think we have turned in a result which is very good in relation to the economic conditions we've faced," he said.

Waikato Dairy Farmers of New Zealand chairman, Richard Myers, said struggling dairy farmers would find it difficult to farm with the level of payout.

Many farmers had had poor production seasons and all they could hope was that commodity prices would bottom out. "But there's no real sign of that yet," he said.

Mr Larsen said the commodity milk price contributed $2.85 of the final figure, with 40 cents - an improvement on last year - derived from added-value products.

Commodity prices had continued to fall, and a low exchange rate had made a big contribution by more than offsetting the decline. The lower exchange rate had benefited farmers by around $500 million, the board said.

A Livestock Improvement Advisory spokesman, Greg Mills, said many farmers would be forced to curb discretionary spending.

He did not expect farmers to go broke, but by putting away their cheque books intense pressure would go on their small town service providers.

Mr Larsen said the added-value business performed well, weathering the economic downturn in South-east Asia better than anticipated.

The most difficult markets were the Venezuela, Brazil and the former Russian states.

"Normally we would have one of these [adverse] events globally. This year we have had to digest all of those."

In June or July, dairy companies will announce final payouts which are expected to vary wider than in the past, and mostly be smaller because of a change in the payment system. Money paid to companies is now more closely linked to market prices for their specific products.

However, the traditional top payer, Tatua in the Waikato, has already indicated it will pay at least 70 cents - up on last year, while Kiwi Dairies said it would add 25 cents and New Zealand Dairy Group has indicated around 30 or 35 cents.

Board chairman John Storey said the outlook for the new season was daunting with no signs of market recovery in the short to medium term.