Chinese middle-class helps Fonterra set new export record

Wednesday 27th April 2011

The world's biggest dairy exporter, Fonterra, says demand from aspiring middle-class consumers in Asia - particularly China - has underpinned recorded the cooperative's record level of monthly exports: 229,000 tonnes in March.

"The real driver for the export record is the ongoing strong demand from China, South East Asia and the Middle East," said the company's managing director of trade and operations, Gary Romano.

"In these regions, we are seeing the emergence of the middle-class with more discretionary income and a desire for more nutritious foods," he said. "Dairy fits the bill".

The record shipments were part of continued growth in global demand for high quality dairy products from New Zealand.

"Our supply chain team were effectively closing the door on an export container every 2.6 minutes," Romano said. "That's equivalent to 560 containers a day".

"We expect the record month will inject around $1.2 billion into the New Zealand economy," he said.

In August last year, Fonterra announced that it had set a new annual export record, sending 2.1 million tonnes of product to international markets for the first time in its nine-year history.

The export tonnages from August 2009 to July 2010 were 60,000 tonnes higher than in 2008-2009 and were a factor in New Zealand's six month run of consecutive trade surpluses.

Milkpowder, butter and cheese all ranked among the leading exports which saw the June trade surplus hit $276 million and the year-to-June surplus in 2010 reach $639 million.

Those gains were also attributed to Asian demand, and Fonterra said at the time that it shipped an average 380 containers a day, with highs of 500 between the peak export months of November and April.

The final payout to farmers for this season's milkflows will be announced in September, but directors have already said that farmers can expect a record payout in the season due to end next month.

The cooperative has indicated that a surplus of around $8/kg milksolids is likely to result in an average of $900,000 being available for each farmer: its current forecast range for the 2011 season is $7.90-$8.00kg milksolids (before retentions) to farmers, unchanged from the levels announced in late February.

Its 10,500 farmers are expected to each receive between $7.75 kg and $7.80/kg in cash from their milk payment, plus the cooperative's dividend.

Fonterra's previous record in 2008 was $7.90/kg (before retentions), the company said. That season, farmers received $7.66 kg in cash.

The 2011 forecast is based on a milk price of $7.50/kg and a distributable profit (surplus) range of $550-$690 million, equivalent to 40c-50c a share, from which Fonterra plans to pay a dividend of 25c-30c a share.

The bonanza payout will be in spite of a tough start to the dairying season with drought, floods and snow storms.

NZPA

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