Fonterra farmgate milk price for 2015/16 announcement

  • Cuts payout forecast to $3.85/kg ms
  • Sees 2015/16 dividend 40-50 cents
  • Announces support for farmers of additional 50 cents/kg


Was currently at $5.25/kg milk solids

So, a big reduction, as expected


More (bolding mine):

  • Forecast total payout available to farmers in the 2015/16 season will be $4.25-$4.35, comprising:
    - Forecast Farmgate Milk Price $3.85 per kilogram of milksolids (kgMS)
    - Forecast earnings per share range of 40 - 50 cents per share.
  • Fonterra has also announced Fonterra Co-operative Support of an additional 50 cents per shared-up kilogram of milksolids to support farmers this season.

Comments from Chairman John Wilson:

  • Continued significant imbalance in the global dairy market between weak demand and surplus supply
  • "This imbalance and the challenge of lower prices continuing for longer than anticipated
  • Current prices are unsustainably low and we are seeing them beginning to impact production levels globally
  • We know the global dairy market will improve. The hard thing to call at the moment is exactly when and how quickly"


  • Capital expenditure for the next two years ... we are now targeting a spend of $500million - $600million less for 2016 financial year compared to FY15

On the Fonterra Co-op Support program:

  • Fonterra Co-operative Support for farmers in the form of a loan to help farmers deal with the challenging conditions
  • The Co-operative will provide all Fonterra share-backed farmers the opportunity to apply for Fonterra Co-operative Support amounting to an additional 50 cents per shared-up milk solids for production for the season
  • This payment, interest free for two years, will be paid back when the Farmgate Milk Price or Advance Rate goes above $6.00 per kgMS
  • A first payment will be made in October for June to December and will continue until May
  • Payments will total 50 cents per shared-up milk solids over the season but will be phased from October as transformation savings are delivered

Milk volume forecast 2015/16:

  • Fonterra has reduced its New Zealand milk volume forecast for the 2015/16 season to 1,589 million kgMS, 2 per cent lower than the previous season
  • "We are already seeing our farmers reducing stocking rates and reducing supplementary feeding to lower on-farm costs. In New Zealand we have the advantage of a largely pasture-based system which will allow farmers to lower costs. Nevertheless, it will be a very difficult season for farmers if current prices continue," said Mr Wilson


NZD immediately marked lower, but bounced almost just as quickly

And higher than pre-announcement now: