{"id":29762,"date":"2017-12-07T00:00:00","date_gmt":"2017-12-06T11:00:00","guid":{"rendered":"https:\/\/www.farmersweekly.co.nz\/fonterra-cuts-milk-price-35-cents\/"},"modified":"2017-12-07T00:00:00","modified_gmt":"2017-12-06T11:00:00","slug":"fonterra-cuts-milk-price-35-cents","status":"publish","type":"post","link":"https:\/\/www.farmersweekly.co.nz\/news\/fonterra-cuts-milk-price-35-cents\/","title":{"rendered":"Fonterra cuts milk price 35 cents"},"content":{"rendered":"Reading Time: <\/span> 2<\/span> minutes<\/span><\/span>

It blamed rising European production for the lower forecast of $6.40\/kg MS, just a week after it cut its dividend range by 10 cents to pay $183 million damages to Danone for losses during the botulism scare of 2013.<\/span><\/p>\n

\u201cWhile the result of the arbitration with Danone has impacted our earnings guidance for the season it has no influence on our forecast farmgate milk price,\u201d chairman John Wilson said.<\/span><\/p>\n

But falling prices at Global Dairy Trade auctions did.<\/span><\/p>\n

Wilson said the cut reflected a prudent approach to ongoing volatility in the global dairy market with the GDT price for whole milk powder, a big influencer of the milk price, declining almost 10% since August 1.<\/span><\/p>\n

\u201cWhat is driving this forecast is that despite demand for dairy remaining strong, particularly in China, other parts of Asia and Latin America we are seeing strong production out of Europe and continued high levels of European Union intervention stockpiles of skim milk powder.\u201d<\/span><\/p>\n

That downward pressure on the milk price was partly offset by the exchange rate.<\/span><\/p>\n

Fonterra\u2019s strong financial position, customer order book and confidence in demand allowed it to increase the advance payments.<\/span><\/p>\n

\u201cIn effect, our farmers will receive equal or higher payments for their milk over this period than were scheduled under the previous $6.75 milk price,\u201d Wilson said.<\/span><\/p>\n

Fonterra said though its first quarter revenue was up sales volumes were down 20% to 3.9 billion liquid milk litres equivalent while its grass margin of 16.7% was also down.<\/span><\/p>\n

Chief executive Theo Spierings said the results were generally as expected. The co-op had started the year with a record low inventory followed by a second year of low spring milk collections because of wet weather.<\/span><\/p>\n

\u201cThis has challenged our ingredients business where we had lower volumes to sell.<\/span><\/p>\n

\u201cAs a result sales were down 19% to 3.6 billion liquid milk equivalents compared to the same time last year.\u201d<\/span><\/p>\n

The gross margin in ingredients was in line with the second half of last year.<\/span><\/p>\n

\u201cHowever, when we compare it to the same period last year it was down from 12.1% to 8.1% mainly due to the rise in commodity prices,\u201d Spierings said.<\/span><\/p>\n

\u201cOur consumer and food service business continued with strong sales volumes in our key markets across both greater China and Asia with overall just a 3% decline to 1.3 billion LMEs in total volume compared to the record levels at the same time last year.<\/span><\/p>\n

\u201cGross margin in consumer and food service was 24%.<\/span><\/p>\n

\u201cWhile this is down on the 31% in the first quarter of 2017 when input costs were lower, it is up on the gross margin percentage in the last quarter of 2017.<\/span><\/p>\n

\u201cThis positive trend demonstrates we can create more value in our consumer and food service business despite higher input costs and reflects the strength of our strategy of moving more volume into higher value.\u201d<\/span><\/p>\n

Spiering said he expected performance to be weighted to the second half of the financial year and he remained confident in its full year forecasts minus the revisions for the Danone settlement.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"Fonterra has chopped 35 cents a kg of milksolids off its farmgate milk price despite its first quarter profit being up 4% to $4 billion but increased its advance payment rate by 10 cents from January.\n","protected":false},"author":34,"featured_media":29688,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":"","_FSMCFIC_featured_image_hide":"","footnotes":""},"categories":[3],"tags":[],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t