Storm clouds on dairy horizon

By Phil Boeyen, ShareChat Business News Editor

Thursday 29th November 2001

Dairy giant Fonterra is warning its shareholders to take a conservative approach to farming in the current season because of the uncertain outlook.

In a speech to the Auckland Chamber of Commerce & Industry on Thursday Fonterra boss, Craig Norgate, said that the international environment has become much more difficult since September 11.

"We have told our shareholders that for the current season we continue to be confident we can deliver another record payout, despite the significant fall in market prices over the past three months. But looking further ahead, the outlook for the 2002/3 season is much more uncertain."

Mr Norgate says the company has written to shareholders advising them to brace themselves for the full impact of lower market prices in the in 2002/3.

"We're recommending that they take a conservative approach with respect to their farming businesses this season. If we do deliver a record payout this season, many farmers will want to keep money in the bank for 2002/3."

However the Fonterra chief says while there are storm clouds on the horizon, the general picture of how the world dairy market is likely to develop over the next five years has not changed in the longer term.

"The growth opportunities, in the developed world, will be found in products such as pizza cheese, functional foods, milk drinks, and - in a small way - organics.

"Clearly, however, our fastest growth is not going to be in the developed world. It'll be found elsewhere."

Mr Norgate says the company is looking to both Asia and Latin America as areas of strong growth over the next few years.

Fonterra is New Zealand's largest company accounting for around 20% of the country's export receipts.

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