Lower milk price will impact locally

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Dairy farmers in North Otago will be able to absorb the forecast farmgate milk price of $5.30 per kilogram of milksolids announced by Fonterra yesterday provided there is a much better opening forecast for the 2015/16 season.

Lyndon Strang, North Otago Federated Farmers dairy representative, was commenting yesterday about the revised milk price and said the worst scenario which will have a negative impact on farmers in the district is to have two consecutive low payouts.

Mr Strang said farmers are currently getting paid based on last season’s high of $8.40/kgms but as the season progresses the full effects of the lower payout will be felt.

“About winter, early spring next year, if the new season payout is low this will be the time that farmers start to feel the full effects.”

Yesterday’s announcement was well-forecasted, he said, and farmers have had a good indication that the GlobalDairyTrade is experiencing a period of volatility.

“A lot of farmers have done budgets based on a $6-6.50/kgms payout but hopefully people have done a sensitivity analysis and can adjust their budgets accordingly.”

“Every farm is different and no doubt people will be working with their banks.”

Asked whether Fonterra should be shouldering market volatility and evening out payments to shareholders, Mr Strang said for the company to hold back money during periods of a high payout is to assume they know the cycle.

“I would rather I received the money.”

“I run a prudent operation and I wouldn’t be recommending that they withhold money.”

Hayden Williams, a sharemilker based north of Oamaru, said yesterday’s announcement is only a shock because it comes off the back of such a high payout.

“At $5.30/kgms most people will still break even,” he said.

“People need to focus on growing grass and harvesting pasture, things which are directly relative to profit.”

“Revisit the budget and decide what is a want and what is a need, for example, for us we’re going to just use tail paint instead of kamars. This will mean we’ll need to be more observant through mating.”

Mr Williams said as farmers cut costs and do more themselves it will put more pressure on and create stress.

“If you’re feeling like that, go and have a beer with your neighbour.

“Robyn and I are also very happy to answer any questions around financials.”

By LINDA MCCARTHY

PHOTO: SUPPLIED – Lyndon Strang, North Otago Federated Farmers dairy chairperson.