New Zealand Dairy Payout to Plummet

November 23, 2008 06:39 PM
Fonterra Cooperative has reduced its forecast payout by 9% for the 2008/09 season. Its 11,000 shareholders have been told the payout will be about $12.20/cwt., a drop from $13.40 from the previous forecast in September. The reduced payout will take millions of dollars out of the New Zealand economy.
The reduction in projected payout follows a 24% drop in international dairy commodity prices in the past eight weeks. Fonterra says given current world financial conditions, demand for dairy products is unlikely to recover by mid 2009 as initially expected.
The cooperative is also coping with the massive write-off of its involvement in the San Lu u operation in China, and themelamine-tainted milk scandal.  Fonterra says it's still committed to having a presence in China but it doesn't know in what form. At present, the write-off has been taken into account in the latest payout.
New Zealand milk production isn't spectacular, either. Cows haven't really ever fired this season after such a wet start. 
The global financial crisis is seeing banks in New Zealand pull out of a number of dairy farm sales agreements. Banks are denying they are pulling out of deals, but real estate agents are saying some deals have been pulled the day before they've been due to go unconditional. In other cases, bankers are rejecting loans because debt loads are too high.

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