NZ’s Fonterra to cut 500 jobs, warns more redundancies to come

“The opening prices of Murray Goulburn and Warrnambool were quite strong really, around that $5.60 a kilo for milk solids, and I don’t think they would have been expecting global commodity prices to come back by as much as they have or as quickly as they have done when making those forecasts”, she said.

But Mr Lancaster said “we have large amounts of excess milk across Europe” and noted that European milk production was already set to decline seasonally.

All prices are now 59% down on last February’s all-time high on the GDT.

No bids were entered for the September, November and January contract periods for whole milk powder, which did not bode well for the demand side of the equation.

Market watchers in New Zealand reacted to the latest bad news. “There are certainly opportunities for prices to fall further”. At $US1848 a metric ton, the whole milk powder average is the lowest since July 2009 and close to the lowest since the auctions began in 2008.

‘Farmers now face two consecutive seasons of extremely low milk prices, ‘ Ms Kilsby said in a note.

“Farm debt levels will rise”.

‘The key aims of the review are to ensure that the Co-operative is best placed to successfully deliver its strategy, increase focus on generating cash flow, and implement specific, sustainable measures for enhancing efficiency… Reducing the number of roles in our business isn’t about individual competency; it is about continually improving the way we deliver performance.’.

The NZ dollar fell below US67c for the first time in five years in the first week of July, as a slide in dairy prices narrowed the odds on more rates cuts.

The co-op, which contains the vast majority of the country’s dairymen, is cutting more than 500 jobs to save NZ$55-60m (£23-£25m) a year.

Considering New Zealand’s lack of export diversity, the subsequent falls in dairy prices are likely to pose some significant pain for the economy.

He commented that the news has been unsettling for for the people affected but a change was needed in order for the company to stay competitive in today’s global dairy market.

The partnership increases Fonterra’s ability to access a globally traded whey protein and lactose market that was worth more than NZ $2.7 billion in 2014.