Strong dollar good for dairy farmers

The strong NZ dollar is a small reprieve for dairy farmers, who are getting lower returns despite producing more milk.

Fonterra said the tough market conditions has resulted in the price of milk solids dropping lower than initial targets.

The Fonterra Shareholders' Council chair, Ian Brown, said the "volatile market conditions'' over the past 12 months were largely responsible for the farmgate Milk Price dropping to $6.08 per kilogram of milksolids (kgMS) from  Fonterra's initial target of $7.21 kgMS.

"The Council considers that given the downturn in global markets the Board has delivered a reasonable return for farmers,'' he said.

"The overall decline in milk powder prices on the GlobalDairy Trade platform and the strength of the New Zealand dollar have served to soften farmer returns and the drop in the farmgate Milk Price is consistent with this.''

The Fonterra Shareholders' Council, which safeguards the interests of the dairy co-operative's 10,500 shareholders, said Fonterra had done all it could in challenging conditions to deliver a payout of $6.40 for a fully shared up farmer.

Mr Brown said that while the payout was not where farmers would like it to be, it was an accurate reflection of the economic conditions facing everyone and urged farmers to move forward with caution.

"New Zealand farmers are not immune to global downturns and I encourage them to continue to be prudent in their financial planning,'' he said.