Westland Milk holds payout - says may hike next season

Photo / NZPA

Hokitika-based Westland Milk said its farmer payout for 2014-15 would remain at $4.90-5.10 per kg of milk solids but that its suppliers could look forward to a $5.60 to $6.00 per kg payout next season.

The payout numbers are before retentions - funds held back to develop the company.

Westland is New Zealand's second biggest dairy co-operative. The biggest, Fonterra, is expected to release its farmgate milk price forecast for next season tomorrow.

Chief executive Rod Quin said Westland's 2015-16 budget represented a balance of many factors. "While it might be more optimistic than some in the New Zealand dairy industry, it is our considered forecast of the expected outcomes for the approaching season," he said.

While Westland expected dairy prices to recover as the 2015-16 season progressed, Quin said they were expected to remain relatively low due to ongoing milk supply pressure from the United States and the European Union.

He said one bright spot was that Chinese whole milk powder buyers were expected to return with more demand in early 2016.
"The reality for the dairy industry is that we are in uncharted territory, with at least three major changes impacting global dynamics," he said.

He listed the three as being the removal of EU milk quotas, ongoing sanctions against Russia and lower demand from China.

In any single season, one of these factors would cause major uncertainty, Quin said.

"It is the combination of all three occurring within this season, with impacts into 2015-16, that has created global disruption," he said in a statement.
The company expects prices to start recovering later in 2015 and Chinese customers to increase demand early in 2016.

"That said, we don't expect large price increases, rather a recovery for milk powders by the end of the season to a figure around US$3000 a tonne," he said.
Westland will start the 2015-16 season with a higher-than-usual advance payout of $4.40 per kg, compared with the usual advance of $3.85.

Quin said this was based on the expected need for cash required on farms to keep milk production as high as possible.

Westland's move into nutritional products was also a factor in the co-operative's higher predictions for 2015-16, as increasing levels of value-added production drove higher and more sustainable pay-outs.

Included in the budget were the third season of nutritional production from new dryers, limited sales from the new UHT plant at Rolleston, and higher returns from Westland's yoghurt subsidiary, EasiYo.