A recent ruling by Fonterra to cut its forecast milk payout will be “hard to swallow” for farmers already struggling with increasing costs, Federated Farmers says.
The dairy behemoth announced last month it had revised its forecast Farmgate Milk Price range for the 2022-2023 season from $8.20-$8.80 per kilogram of milk solids to between $8-$8.60. This also reduces the midpoint of the range by 20 cents from $8.50 to $8.30 per kilogram of milk solids.
The Farmgate Milk Price determines the amount paid for milk solids by farmer shareholders.
Hauraki-Coromandel Federated Farmers president Robert Craw told The Profile the cut would be “hard to swallow” for most dairy farmers who were already battling increased expenses.
“Guys haven’t had a great opportunity to put a reserve in the bank to get them through a major drop in the payout like that so coming forward into this season, I’m picking there is going to be some pretty distressed farmers running very close to the wire,” he said.
“It’s going to impact them quite hard, there’s a lot of people who are struggling with this season’s payout with inflationary costs, fuel is a big cost and the repairs from storm damage on top of that.
“Granted we have had a good growth season for grass, so that’s helped a lot of people out, but it hasn’t equated to money in the bank which is going to be the hard part going forward.”
Mr Craw advised dairy farmers in Hauraki-Coromandel plan ahead this season to alleviate the recent “kick in the guts” for them.
“Get some budgeting advice and consultants’ advice as to how to best minimise your expenses and maximise returns to try and alleviate the pain in the short term until things get back on track and recover,” he said.
“We’re all crossing fingers and hoping this is a short term blip on the radar and that things will turn around pretty quick.”
Fonterra chief executive Miles Hurrell said the two main drivers behind the price change were whole milk powder demand in China not yet returning to expected levels and milk production in the Northern Hemisphere increasing as it headed into its spring flush.
“With these factors weighing on demand, prices have not increased to the levels required to sustain a higher forecast farmgate milk price for this season,” he said.
“We recognise this change has an impact on our farmers’ businesses, at a time when many are facing increasing costs.”
Mr Hurrell said to assist on-farm cash flow, Fonterra had adjusted the advance rate schedule to get cash to farmers earlier.
The advance rate schedule is the proportion of the season’s farmgate milk price paid to farmers each month.
“We have increased the March paid April payment and plan to hold payments at that level until June,” he said.
