Fonterra discusses milk price forecast and farmer meetings

Concerns around rising on-farm costs were discussed at Fonterra's recent farmer meetings. Photo / File

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Fonterra recently finished a series of meetings across New Zealand, where the co-op’s performance and outlook were discussed with its farmers.

Over 1200 farmers attended 30 meetings, to hear about the co-op’s half-year results and to ask questions, Fonterra Regional Head for Bay of Plenty, Lisa Payne said.

It was important for Fonterra’s managers and board to keep in touch with farmer shareholders, Payne told The Country Sport Breakfast’s, Craig Cumming.

“We always get a lot out of the conversations and the questions, and the challenges, and I guess it’s those challenges from our owners - and understanding what’s top of mind for them - that makes us stronger and helps us make some decisions that are relevant to their business.”

One of those decisions came earlier this week with the co-op revising its forecast Farmgate Milk Price range to $8.00-$8.60 per kg of milk solids.

This reduces the midpoint of the range by 20 cents from $8.50, to $8.30 per kg.

Payne said the co-op was aware of the impact any Milk Price revision would have on farmers’ businesses, especially with the current rising on-farm costs.

“Although the forecast and the Farmgate Milk Price isn’t purely in our control - it’s market-driven - one thing that is in our control is when the payments are made.”

Therefore, Fonterra focussed on letting farmers know of any changes as early as possible, such as the Advance Rate, which assists on-farm cash flow, Payne said.

“The management team has enhanced the Advance Rate schedule and paid out money a bit earlier - just trying to take some of that initial cost pressure off that we have now.”

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Fonterra was able to do this due to the strength of the co-op’s balance sheet, which is further supported by a strong full-year earnings forecast, which is sitting at 55-75 cents per share.

Meanwhile, Fonterra introduced “Flexible Shareholding” on Tuesday last week, a new capital structure which farmers voted for in December 2021.

Listen below:

“Essentially ... Flexible Shareholding makes it easier for new farmers to join our co-op and for existing farmers to remain by giving them a greater choice about the number of shares - ie the level of investment - that they need to have at any one time,” Payne explained.

The new structure was also “a bit more inclusive,” because sharemilkers, contract milkers and farm lessors who couldn’t previously hold Fonterra shares could now do so, she said.

“Every farmer’s situation is quite unique [and] so that’s a key part of my team’s role ... to make sure that our farmers feel supported in understanding what flexible shareholding means to them, so they can make the best decision for their farming business.

“Ultimately we think that this is going to help us build an even stronger co-op that can support farmers for generations to come.”

Also in today’s interview: Payne talked about her rural upbringing and her background at Fonterra before she became Regional Head for Bay of Plenty.