Talk Money: November 26

Tony Field (Paul Henry)
Tony Field (Paul Henry)

What happens to Fonterra matters to all of us. The better the co-operative does, the better the economy does.

But there are growing concerns Fonterra's not performing well enough.

There is not much it can do about global dairy prices. But critics say the co-operative could be doing more to ramp up sales of its value added products.

The concern about Fonterra is shared by many of its own farmers and was central to yesterday's Annual General Meeting.

Two formers directors proposed cutting the size of Fonterra's board from 13 to 9, arguing it would improve the co-operative's performance and its decision making.

But the resolution failed.

53 percent of shareholders voted in favour. They needed 75 percent support.

But it is clear change is coming.

Fonterra's begun its own review and says that will lead to a special vote next year.

THE PAYOUT

Fonterra told farmers it was sticking with its forecast payout.

The co-operative is forecasting a farmgate milk price of $4.60 per kilogram of milk solids. It is also expecting a cash dividend for shareholder farmers of 35 to 40 cents per share.

That would take the payout for shareholder farmers to around $5.00.

The trouble is that the average farmer probably needs a payout of $5.30 just to break even.

The situation is a particular worry for those farmers who have alot of debt. That includes some who have converted to dairy in recent years. Many of them are in the south island and are also faced with the prospect of a drought this summer.

LONG HOT SUMMER

Weather forecasters are predicting that the strong El Nino conditions this summer could bring severe drought conditions.

Regions like Canterbury are already showing signs of the dry conditions.

In El Nino years New Zealand tends to experience stronger or more frequent winds from the west in summer, leading to drought in east coast areas and more rain in the west.

Organisations like Federated Farmers and Dairy NZ are working with farmers to make sure they are prepared.

A GLOBAL WORRY

It is not just New Zealand worrying about El Nino.

Farmers around the world are concerned about the possible effects.

While some will be dealing with dry farm land, others could see crops destroyed by floods. Sea temperatures could rise which will have an impact on the amount of fish that is caught.

The Asian Development Bank says the economic costs will be high, affecting energy, food and water prices.

The 1997 to 1998 El Nino caused US$30 to $45 billion.

THE DOLLAR

The New Zealand dollar has edged higher overnight against all the major currencies.

It was trading at 65.71 US cents at 7-15am.

The Kiwi was 0.34 percent higher at 90.66 Australian cents.

The dollar was 43.49 British pence, 80.60 Japanese Yen and 61.87 Euro cents.

Watch the video for the full Talk Money segment.

 

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