West Coast farmers will have a skip in their step to the cow shed after their co operative announced an ambitious forecast range of $5.60 to $6 a kilogram of milksolids for next season.
The 2015 16 prediction, which Westland Milk Products admits might be more optimistic than other dairy companies,Cheap Jerseys china is after itconfirmed a payout range to shareholders for the 2014 15 season would likely remain unchanged at $4.90 to $5.10/kg.
The forecasts come before company retentions, but place it ahead of Fonterra’s $4.50/kg milk payment forecast and an estimated dividend range of 20 30 cents a share for this milking season soon to end.
Fonterra is also due to unveil its 2015 16 forecast and ASB bank expects it to roll out aconservative forecast in the area of $5/kg and later pushing this out to $5.70/kg.
Westland has instead chosen the bolder option.
Chief executive Rod Quin said the 2015 16 budget represented a balance of many factors.
“While it might be more optimistic than some in the New Zealand dairy industry, it is our considered forecast of the expected outcomes for the approaching season.”
Dairy prices were expected to recover as the 2015 16 season progressed, but would likely remain relatively low from more milk being supplied from the United States and the European Union, he said.
Quin said a bright spot was that Chinese whole milk powder buyers were expected to return with more demand in early 2016.
“The reality for the dairy industry is that we are in uncharted territory, with at least three major changes impacting global dynamics.”
Westland leaders were wrestling with the effect on prices from ongoing sanctions against Russia and the removal of EU milk quotas after 30 years with protectionist import duties still being retained. Additionally, lower demand from China with high imported stocks overhanging the market and growth in Chinese milk production was making forecasting in volatile times difficult.
“In any single season, one of these factors would cause major uncertainty,” said Quin. “It is the combination of all three occurring within this season, with impacts into 2015 16, that has created global disruption.”
Quin said Westland had weighed up the factors in setting its budget and expected prices to start their the road to recovery later in 2015 and Chinese customers to increase demand early in 2016.
“That said, we don’t expect large price increases, rather a recovery for milk powders by the end of the season to a figure around US$3000 a tonne.”
Westland will begin the 2015 16 season with a higher than usual advance payout of $4.40/kg instead of its traditional $3.85/kg to help farmers with their cash flows after a low payout season.
The result of this was expected to keep farm milk production up and still give Westland enough working capital.
Westland’s increasing move into nutritional products is another factor in its higher predictions for 2015 16.
Raising its value added production was expected to drive out higher and more sustainable payouts. Westland is in its third season of nutritional production from dryer six at its Hokitika site and the first season of nutritionals from dryer seven as well as initial sales from its new UHT plant at Rolleston and higher returns from its EasiYo subsidiary.
