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Fonterra promises early dividend to struggling dairy farmers
[WELLINGTON] Fonterra Co-operative Group, the world's largest dairy exporter, said on Monday it would make an early dividend payment to help its struggling New Zealand farmers as it reported a drop in its milk collection due to low global prices.
The announcement comes just days after Australia's competition watchdog announced an investigation into recent decisions by Fonterra and Australian competitor Murray Goulburn Co-operative Co Ltd to slash farm gate milk prices.
Fonterra's early dividend will benefit its 10,500 farmer-shareholders in New Zealand, who have seen around NZ$7 billion (S$6.45 billion) wiped off their collective revenue in the past two years due to low prices, but won't directly assist its Australian suppliers.
In Australia, Fonterra announced financial support measures for its autumn calving suppliers, who are disproportionately affected by the farmgate price reductions announced last week. "It continues to be a tough season for our farmers with ongoing pressure on the Farmgate Milk Price due to the supply and demand imbalance in the global dairy market," Fonterra said in a business update.
Fonterra, which plans to provide its farmgate forecast 2016/17 price later this month, said it would pay a dividend of NZ$0.10 per share in June to help New Zealand farmers struggling with cash flow. It flagged the early dividend in March.
The company's total forecast annual dividend was NZ$0.40 cents per share.
Australian dairy farmers were surprised and angered when Fonterra and Murray Goulburn, Australia's biggest dairy producer, reduced their farm gate prices from A$5.60 per kg of dairy solids to between A$4.75 and A$5.00 per kg over the past month.
The Australian Competition and Consumer Commission is examining the timing and notice of the cuts. A finding of misleading or unconscionable conduct by the ACCC could expose Fonterra and Murray Goulburn to fines of up to A$1.1 million.
Fonterra was expecting the New Zealand milk collection for the season to be 1.558 million kilograms of milksolids, which is three percent lower than last season.