New Zealand’s second biggest dairy co-operative Westland Milk Products has upped its payout prediction and released a budget for the 2016-17 dairy season of $4.55 – $4.95 per kilo of milk solids (kgMS).
Payout for the current season will be in the range of $3.80 to $3.90 per kgMS.
Westland will also start its payout advance payments for the 2016/17 season at $3.80 per kgMS, payable on September 20, 2016.
“This will provide much needed cash as early in the season as possible,” said Matt O’Regan, company chair.
“Advance rates are budgeted to be phased down then stepped up, an approach similar to previous seasons,” O’Regan said.
While the 2016/17 forecast is predicted to end with better result than the 2015/16 season, O’Regan said it still leaves farmers with cash flows well below their cost of production. O’Regan said the board and management will be looking for every opportunity to get as much cash to farmers as possible.
Company CEO, Rod Quin, said the key influencers on payout are international market prices, foreign exchange rates, the contribution of Westland’s value-add strategy, milk flows and expenses.
“The contribution to payout of our strategic move into value-add products — infant nutrition, EasiYo, retail butter and UHT milk and cream — is worth noting,” Quin said.
He added that, collectively, their value over and above the earnings they can expect from skim milk powder is budgeted at 48c per kgMS. Quin said while Westland’s pay out prediction is more optimistic than the current season, the market still faces a number of challenges.
“Prices remain under pressure as European and US dairy stock piles are now a feature of the market,” he said. “Early contracts in our sales book are in line with budgeted prices, but market volatility with price movements, both up and down that can be sudden, make forecasting difficult.”
He added that, based on what they see in the market today, with a forward view of global stock levels, customer demand and milk flows, they anticipate some minor increases for whole milk powder. However, he said they are expecting pressure on skim milk and butter prices.
