Farmers Weekly May 31 2021

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10 Exporters welcome shipping relief Vol 19 No 21, May 31, 2021

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Fonterra announces $8 forecast

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ONTINUED strong demand for dairy relative to supply has prompted Fonterra to forecast a record opening milk price for the 20212022 season. The $7.25-$8.75/kg MS forecast with a $8/kg MS mid-point beats the previous record high of $7. Fonterra chief executive Miles Hurrell said it was great news for farmers. “The farmgate milk price is a key driver into their financial performance and it’s the highest opening price we’ve ever come out with and from our perspective, farmers will be rapt to hear it at the start of the season.” Global demand for New Zealand dairy continued to grow and China is leading the charge as its economy continues to recover strongly. “Prompted by covid-19, people are seeking the health benefits of milk and customers are wanting to secure their supply of New Zealand dairy poducts and ingredients. Growth in global milk supply seems muted and the global supply of whole milk powder is looking constrained.

We’re expecting whole milk prices to remain at current levels for the near future. Miles Hurrell Fonterra “The ag sector’s kept its head down and done what it’s done very well for a number of years, and shows that we can contribute to help get New Zealand through this from an economic perspective.” However, the 75 cent forecast range was a signal to farmers that it was still early in the season and there were still a number of risks in the marketplace.

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GOOD CALL: Dairy farmer Melissa Slattery says while she’s concerned about Fonterra’s capital restructure timing, she appreciated the opportunity to engage with its directors.

Fonterra-farmer consultations fruitful Gerald Piddock gerald.piddock@globalhq.co.nz TE AROHA dairy farmer Melissa Slattery says she appreciates Fonterra was being proactive and having this conversation now and listening to the views of its farmers before it became a serious issue. It was not ideal seeing the share price drop, and Slattery was concerned it could result in losing security over those shares and it becomes a nominal value purchase between farmers. “But there’s a lot of water to go under the bridge before that potentially happens. There are lots of things to consider and it’s good to be able to have that conversation,” Slattery said.

Slattery understood the reasoning behind the calls for capital restructuring. Her main concern was some of the ‘what if’ scenarios that the options presented, including buying back the share fund or losing security over the shares. Grant McCallum, Maungaturoto, said he reluctantly supported the proposal and its share value disruption in the short term to achieve a long-term, intergenerational co-operative. “We need the best transition, for the lowest cost, to help those farmers who want to retire. “If you accept that the challenges of falling milk supply are real, then the solution seems

to be along the lines proposed.” McCallum said that before Fonterra the share value was arbitrary but over time the company had allowed itself to be defined by share value. “We have lost sight of the real principles of a co-operative.” Geoff Crawford, Hikurangi, lamented the lack of willingness to fight back and regain milk supply. “The milk payment system is confusing compared with Open Country and we need a contract supply option. “The new generation of dairy farmers will be immigrants and for many land ownership is not the main objective.”

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Gerald Piddock gerald.piddock@globalhq.co.nz

“Based on these supply and demand dynamics, along with where the NZ dollar is sitting relative to the US dollar, we’re expecting whole milk prices to remain at current levels for the near future,” Hurrell said. The high milk price meant the co-operative would be contributing more than $12 billion to the New Zealand economy next season.

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Farmers Weekly May 31 2021 by AgriHQ - Issuu