Two big announcements awaited from Fonterra – one deals with dairy payout, the other with the co-op’s capital structure

So what  are  the  chances Fonterra’s  payout  to its farmer-suppliers  could  top  $8kg/MS the  soon-to-end  current  season?

That would give a  timely  boost  to  the  rural economy  and give  farmers  the kind  of  surge  in incomes  which  would encourage them  to  step up the  pace  of  adapting their dairy farming practices as  the  country  moves  to meet its  climate  change goals.

In March, Fonterra raised its forecast milk price for this season to between $7.30 and $7.90kg/MS with a mid-point of $7.60. That was up from $7.14 last season.

But now, after several  good  results  from the fortnightly GDT auctions, and indications from futures contract prices, the  speculation  is that the payout  could go  higher.

While the GDT index slipped 0.7% at the latest auction this week, the price of whole milk powder, which has the most impact on what farmers are paid, gained 0.7% to an average US$4115 (NZ$5756) a tonne while skim milk powder, the second-most important, rose 2% to US$3433/t.

Butter prices slumped 12% to US$5035/t, weighed down by extra volume on offer. Continue reading “Two big announcements awaited from Fonterra – one deals with dairy payout, the other with the co-op’s capital structure”

John Shewan goes out to bat for Fonterra’s disappointed unit-holders

It’s  been  a  rough year  for  unit-holders in Fonterra  Shareholders Fund, with the unit price  slumping   from  $5.12   to   its  lowest point ever at  $3.15.  Chairman  John  Shewan  didn’t mince  words  when he told the Fund’s annual  meeting  this week  Fonterra’s  financial performance   had been  “very poor”   in 2019.

Not only had the unit price fallen markedly  but no distribution had been paid, he said.

This is disappointing and frustrating…Fonterra’s decision to not pay a dividend, and therefore a distribution to unit holders, as well as significantly impairing a small number of significant assets, no doubt came as a surprise to many of you. I understand and share the frustration that you rightfully feel, and the impact that Fonterra’s decisions have had on the unit price”.

Institutions and  private  wealth funds have  fled the  stock, the former declining from 25% to 15% and private wealth falling from 14% to 7%. Continue reading “John Shewan goes out to bat for Fonterra’s disappointed unit-holders”