Synlait lowers forecast payout for 2014/15 season, announces higher price for 2016

Synlait Milk, the South Island based milk company, lowered its forecast payout to dairy farmers for the current season as prices remain weak amid oversupply and soft demand. It announced a higher price for the upcoming season on expectation prices will recover.

The Rakaia based company lowered its forecast payout for the current 2014/15 season to a range of $4.40-$4.60 per kilogram of milk solids, from a previous range of $4.50-$4.70/kgMS, it said in a statement. It forecast a $5.50/kgMS payout to farmers for the upcoming 2015/16 season.

Synlait is following the lead of larger rival Fonterra Cooperative Group, the world's largest dairy exporter, which lowered its payout for the current season by 10 cents/kgMS late last month to $4.40/kgMS and announced a $5.25/kgMS payout for the upcoming season. Dairy companies have pulled back their expectations for milk prices as they face an oversupply in global markets following Russia's ban on dairy imports, the removal of dairy quotas n Europe and low demand in China. That's putting pressure on farmers, with the Reserve Bank estimating a quarter of them are operating in negative cash flow.

"We’re very aware of how financially tough this current season is for our suppliers," said managing director John Penno. "We are confident commodity prices will recover over time and our 2015/2016 forecast milk price assumes we will see the beginning of this recovery from the current low prices.

"The global oversupply is being met by soft demand across the board," he said. "This creates a lot of uncertainty in an already volatile market, so it will remain a fragile environment for the immediate future."

Synlait expects to announce the final milk price for the 2014/15 season late September, along with an update to the 2015/16 forecast milk price and advance rates.

Shares in Synlait last traded at $2.73 and have shed 15 percent so far this year.

BusinessDesk.co.nz

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.

Related News:

GEN - Completion of Purchase of Premium Funding Business
Fletcher Building Announces Executive Appointment
WCO - Director independence determination
AIA - welcomes Ngahuia Leighton as 'Future Director'
Mercury announces Executive team changes
Fonterra launches Retail Bond Offer
October 29th Morning Report
BIF adds Zincovery to its investment portfolio
General Capital Resignation of Director
General Capital subsidiary General Finance update