For Fonterra's farmers, investors and employees the severity of the dairy downturn will become clear early next month as the co-operative starts a fresh round of consultation with staff and revises this season's farmgate milk price forecast which, at $5.25 a kg of milksolids, is starting to look precarious.
The company said early this month that it was "disestablishing" 523 positions in a bid to increase cash flows and improve efficiency after consultation with its central procurement, finance, information services, human resources, strategy and legal teams.
Come August 5, the co-op will begin consultations on new business structures with its people in administration roles, sales " ingredients, consumer, marketing, research and development, communications, health and safety, food safety and quality, "group resilience" and risk, property, procurement and change management.
Two days later, the board will convene to discuss, among other things, the farmgate milk price for 2015/2016. Since the latest forecast on May 28, wholemilk prices - which make up about three-quarters of the farmgate milk price - have dropped by US$461, or 20 per cent, to US$1848/tonne. By some estimates, that's about half the cost of production.
Fonterra's existing forecast of $5.25 rests on wholemilk powder reaching around $3500 a tonne towards the end of the current season, which is looking unlikely.