Increased revenue from Fonterra could help farmers struggling with rising costs

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Dairy farmers are hoping for some relief from rising farm costs in the form of more Fonterra dividends.

The cooperative has raised its forecast for next year’s profits.

It raised its profit forecast to 45c to 60c per share from 30c to 45c per share.

Fonterra chief executive Miles Hurrell said the rise in expected profits showed a continued appetite for dairy.

A recent global increase in the price of whole milk powder has been a positive signal, reversing a price decline that has driven farm gate milk prices, Hurrell said.

“This extended period of favorable pricing relativities between our protein and cheese portfolios and whole milk powder is the primary driver for the increased FY23 earnings guidance range,” he said. declared.

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Fonterra’s strategy was based on growing demand, limited supply and a shift from milk to higher value products, Hurrell said.

Waikato dairy farmer Pete Morgan said that for farmers delivering milk to Fonterra, the increased income will help them weather periods of high farm inflation and rising farm costs.

The increase reflects the strength of the company and gave shareholders confidence, he said.

It was an endorsement of the role dairy had in nutrition around the world and the company’s ability to provide more than just a raw product that people were willing to pay more for, Morgan said.

The increase in dividends is a direct result of the added value Fonterra has brought to its milk, he said.

Waikato dairy farmer Pete Morgan says the increased income will help farmers weather periods of high farm inflation and rising farm costs.

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Waikato dairy farmer Pete Morgan says the increased income will help farmers weather periods of high farm inflation and rising farm costs.

Adding value was particularly difficult at a time when the price of milk was already high, because the base price of the main ingredient in high-end products, such as yogurts, made these products more expensive than usual, he said. he declares.

The premium infant formulas or creamers used by foreign chefs, which brought in significant revenues above the price of milk or whole milk powder, created real value, he said.

Any farmer who delivered milk to Fonterra had to be a shareholder and received the full milk price for his milk, as well as dividends.

To become a shareholder, farmers had to join. To determine his purchase price, a farmer multiplied the kilograms of milk solids he delivered to Fonterra each year by the stock price at the time, he said.

Flooding in the Far North and northern South Island means Fonterra cannot pick up milk from some farms.  Fonterra has revised its milk collection forecasts for the 2022/23 season.

Anthony Phelps / Stuff

Flooding in the Far North and northern South Island means Fonterra cannot pick up milk from some farms. Fonterra has revised its milk collection forecasts for the 2022/23 season.

If a farmer wanted to become a shareholder now and delivered 200,000 kg of milk solids per year, then he would multiply by the share price of $2.60.

Work was underway at Fonterra to help new farmers become shareholders at a time when stock prices were high, Morgan said.

Fonterra has revised its milk collection forecast for the 2022/23 season from 1,510 million kilograms of milk solids to 1,495 million.

Indeed, there has been a reduction in milk collection in the Far North and northern regions of the South Island due to flooding, Hurrell said.

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