Fonterra revised forecast
Released 21 Nov 2008
"While farmers will be disappointed at the revised forecast of six dollars per kilogram of milksolids, it was not unexpected," said Willy Leferink, vice-chairman of Federated Farmers Dairy.
"The world economic situation is so unusual and so debilitating to trade, that Fonterra's latest announcement at least gives some certainty.
"World commodities have literally found a big hole and jumped into it and dairy is not immune. Oil has plunged more than 60% since July and Wheat is down 56% since March. It puts into perspective the 24% decline in international dairy commodity prices over the past eight weeks. It is one of the toughest international trading conditions in memory.
"The one message dairy farmers have from this announcement is to tighten our belts and not look for any immediate rebound. That's sensible given the continuing turmoil on world markets. The shame is that urea and fertiliser costs here in New Zealand remain stubbornly high.
"A critical challenge for the new government is to control compliance costs at both central and local government levels. On-farm inflation has been running rampant over recent years driven largely by compliance. The new government must reign this in, and quickly.
"The Reserve Bank too has to look at this revised payout and factor it into the 4 December OCR announcement.
"I wish to point out that the long term fundamentals for dairy are solid. Adjusted for inflation this still represents one of the better payout indicators since the early 1970s, if it can be maintained. If being a small word with a very large meaning.
"New Zealand farmers provide the staples of life. While people can forego a new car they cannot forego food. That means we are still bullish in the medium to long term but the economic taps are being turned down, " Mr Leferink concluded.
For further information contact:
Federated Farmers Dairy vice-chairman, Willy Leferink, 021 796 037
Federated Farmers Dairy vice-chairman, John Bluett, 027 444 7613, 07 825 9709
