Westland Milk Products, the Hokitika-based dairy cooperative, has overtaken rival Fonterra Cooperative Group in cutting its forecast payout to farmers, citing falling global dairy prices and the persistent strength in the kiwi dollar.
The cooperative revised its payout forecast to between $5.40 and $5.80 per kilogram of milk solids before retentions in the 2014/15 season, down from between the $6 and $6.40/kgMS forecast in July. Chief executive Rod Quin pointed to the 12 percent drop in skim milk powder prices at the last GlobalDairyTrade auction, which makes up a substantial proportion of Westland's production as weighing on the new forecast.
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"The reduction is driven by falls in prices across the global and the continued high value of the New Zealand dollar," Quin said in a statement. "Our traditional reliance bulk dairy commodities such as skim milk makes us more vulnerable to the cyclical swings of the international dairy market."
Fonterra yesterday affirmed its forecast payout at $6/kgMS, saying it expects commodity prices to improve later this year or early in 2015, with global dairy demand continuing to grow.