Something festive for Fonterra farmers? A hint of solace would be a start…

Fonterra’s  suppliers will be choking on their  Xmas  rations, as they  digest the  price  blows  the co-op  has delivered.  First,  the dairy giant has  revised down  its  forecast milk payout  range  for the season to $6-$6.30 from the  earlier  $6.25-$6.50, and, second,  it is clawing back  some of the $4.15/kg  advance payment  rate.

Farmers  in  January will be paid  $4/kg for the  milk they supplied in  December plus the  co-op  is  clawing  back  15c/kg for all the  milk  supplied   between  June and November.

It  is  not   surprising that farmers   with  costs of  production  running   at  or above  $6/kg  are  reported to  be  “shocked”  and  “angry”.   Even those  efficient  operators   who have  lower  operating costs  won’t be happy  with   Fonterra  saying it  “appreciates”  the budgeting impact  the updated $4 advance rate will have on farmers in  January.     Continue reading “Something festive for Fonterra farmers? A hint of solace would be a start…”

Fonterra must learn to be driven by  profitability, not  volume 

Fonterra  chairman  John Monaghan  sought to   cheer  up  the  co-op’s farmer-shareholders  by telling them  at what was reported to be a “packed” annual  meeting  that  “For a time this year, NZ farmers were paid this highest milk prices in the world.”

He  insisted there has been a structural change in  the co-op’s milk prices since Fonterra was formed.

We’ve gone from being paid about half as much as our global peers to the point now where we are consistently paid the same or thereabouts.It sounds arrogant to say it, but the fact is that simply never would have happened without a strong Fonterra”. Continue reading “Fonterra must learn to be driven by  profitability, not  volume “

Why Fonterra’s farmers should be wondering what the Irish can teach us

It’s a critical  week for   the country’s largest company,  Fonterra, which has to find a new direction  after shipping out its  chief executive, Theo Spierings, writing off  more than  $1.5bn from its balance sheet, and posting its first loss  in its  17-year  history.

Meanwhile,  back  on the farm,  Fonterra’s suppliers  are  absorbing  payout  downgrades  as  well as a slump  in  dairy farm  prices. At the  same  time  they are  seeing  the valuations  of other companies in the dairy industry—notably  A2 Milk and Synlait— soaring  on  the  NZ  sharemarket.

So  they’ll be looking  to Fonterra’s  leaders  for  some  fresh ideas  on  how to  turnaround the fortunes of the  big  co-op. Continue reading “Why Fonterra’s farmers should be wondering what the Irish can teach us”

Beingmate has muted Fonterra’s Chinese hum

Fonterra is “humming” in China, according  to  a headline  in the  NZ  Herald,  although the  text  of the article beneath it mentioned  the  “woes”  associated with  the co-op’s investment  in Beingmate.

The  co-op  is having to absorb   an impairment of   $405m    on the value of its 18.8%  holding in Beingmate.  On top of the $183m payment it has had to make  French  giant  Danone, the  writedown  takes the gloss off that  otherwise  “humming”  performance.

Some of its farmer-shareholders may be looking over the  fence to  the rather different  outcome  for A2 Milk, which lifted its annual  sales  68% in the June year,  with  revenue   rising  from $549m in the June  2017 year  to  $922m.  During  the latest  year A2  Milk achieved gross margins  up  to  49%.   Continue reading “Beingmate has muted Fonterra’s Chinese hum”