By PHILIPPA STEVENSON
Mega dairy co-operative Fonterra dealt a blow to farmers and the national economy yesterday when it again cut its forecast payout for this year.
Dairy farmers' incomes were already down a third, or $1.8 billion, on the previous year.
Yesterday's announcement carved off another $100 million.
The country's 13,000 dairy producers
are now predicted to receive $3.60 a kilogram of milksolids, compared with last year's $5.30.
This is a drop in income for the average farmer of more than $127,000 this year.
The tremors will be felt throughout the economy as farmers spend less.
Fonterra generates 20 per cent of New Zealand's exports and 7 per cent of gross domestic product.
Chief executive Craig Norgate said dairy commodity prices had been at their lowest levels in more than 10 years.
"On average, commodity prices were 30 per cent lower than in the same period the previous year," he said. "Compounding this, the New Zealand dollar was on average 15 per cent higher against the US dollar over the same period."
The possibility of war in Iraq was also an "unquantified risk hanging over the global environment at the moment and choking off global growth".
Federated Farmers' Dairy Farmers NZ chairman Kevin Wooding said farmers had expected a $3.70 payout. Yesterday's 10c cut chopped another $8000 from the average Fonterra farmer's earnings.
He said the cut would have a knock-on effect throughout the economy as farmers spent less.
"We're gutted as farmers - it's just not good enough."
Fonterra's formation was supposed to result in better, not worse payouts, Mr Wooding said.
"It's not a very good performance at $3.60, I can assure you of that. They've got to tell us where it's gone. It should be up around $4.20."
He said Fonterra was being comprehensively outperformed by other dairy companies, and next year was not looking any better.
"It's just not up to scratch. If Westland and Tatua [dairy companies] beat us by the same margin as last year, then the farmers are going to be pretty angry.
"We want it to start to perform, stop the poncing around and get on with the job, run the business."
In a report on its six-month performance to November, Fonterra said sales revenue was down more than $1 billion on the same period last year, to $5.9 billion, because of low export commodity prices and the rising dollar.
