May 9, 2013

In the first 11 months of the season, Fonterra's milk collection dropped 0.5% as the impact of drought in February, March and April on dairy farms was greater than what the company has anticipated.

The giant co-operative collected 1.414 million kilogrammes of milk solids in the latest 11 months, from 1.421 million kilogrammes of milk solids in the same period a year earlier, it said in its Global Dairy Update.

In the North Island, where drought was declared in most regions, collection fell 5.2%, while in the South Island it rose 8.2%.

"Consistent rainfall across the country in April has helped to improve on-farm conditions, but this has been too late to stop milk production falling below last season's record levels as many suppliers have already stopped producing for the season," the company said.

Milk collection in April tumbled 34% compared to the same month of 2012 and prices of dairy products reached a record on the GlobalDairyTrade platform last month. They edged off their highs in the first sale in May.

In March, Fonterra was predicting production would about match the previous season, having previously forecast an increase. The company lifted its forecast payment to farmers by US$0.30 per kilogrammes of milk solids and expects to pay an annual dividend of US$0.32/share, meaning a fully shared up farmer will get a cash pay-out of US$6.12 this season, down from US$6.40 last year. Units in the Fonterra shareholders fund fell 0.6% to US$7.85 this morning, having gained 13% this year.