Dairy co-op offers £180m of loans to crisis-hit farmers

Fonterra said it would cut 523 jobs in operations including finance, information services and human resources, and would result in payroll savings of up to NZ$60 million (RM150 million) a year, following a one-off cost of up to NZ$15 million. That’s sent world dairy prices to their lowest since 2009.

THE milk market is getting “dangerous” for suppliers as prices continue to plunge, the head of Kerry Group warned yesterday.

The farmer funded DairyNZ said New Zealand milk production is expected to fall by 2 or 3 per cent this season, due mostly to a higher than normal cow cull.

“We are in a hard position right now with global dairy prices – they are clearly totally unsustainable”, he told a phone conference this afternoon.

Some farmers say they could be forced off the land if the price hasn’t picked up by the end of this season, because a payout under $4 doesn’t even cover their costs.

“For the average farmer you are looking at covering a business loss of NZ$260,000-280,000 this season but for many it will be a lot more than that”, said DairyNZ chief executive Tim Mackle.

He said, just like any forecast, the chances of it at the start of the season ending on exactly that number in 12 months time was very remote but it was their best estimate of where they saw things going in the market over that period.

ASB said the support would “definitely be a boost to farmers’ confidence”. However, it will be a tough season for our farmers.

Mr Wilson said Fonterra is uniquely placed to help its farmers because of the Co-operative’s underlying strength and is providing Fonterra Co-operative Support for farmers in the form of a loan to help farmers deal with the challenging conditions. This payment, interest free for two years, will be paid back when the milk price goes above NZ$6.00 per kilo of milk solids. These payments are made to farmers throughout the year. The support is expected to cost Fonterra around $NZ430m, depending on take-up rates.

Dairy prices slumped to a 12-year low at this week’s GlobalDairyTrade auction amid a global glut, hurting New Zealand farmer incomes and threatening to curb economic growth in the nation that relies on dairy for a quarter of its export earnings.

With stronger beef prices farmers may look at incorporating an element of dry stock farming, particularly if dairy herd sizes are reduced, he said.

ANZ said the auction was “about as bad as it could have been”.

The New Zealand dollar initially fell after the Fonterra payout announcement, but then rose about 20 basis points to US65.6c late in the day.