Farmers seek interest rate cut after lower payout

Dutch cows in the meadow

Farmers are urging the Reserve Bank to cut interest rates this week after Fonterra's forecast dairy payout was cut for the second time this year.

The dairy giant yesterday trimmed the forecast for the current season to $3.90 per kilogram of milk solids from $4.15kgMS. It also cut its estimate by 45 cents in January.

Federated Farmers says the move has heaped more pressure on those already under stress and urged Reserve Bank governor Graeme Wheeler to cut the official cash rate on Thursday.

"Anything that can ease the pressure on farmers' bottom line will help get as many dairy farmers as possible through the current season," said dairy chairman Andrew Hoggard.

Fonterra shareholders council chairman, Duncan Coull, told the Paul Henry programme this morning, all farmers – both young and old will struggle with this downturn.

"Primarily, a lot of our young milkers haven’t been through a downturn like this before – so I guess it is around providing that sort of support to them, but I think we’re concerned for all farmers now because $3.90 is far below the level of profitability for farmers to run a viable business."

He said with reference to his own community in Otorohonga, there is $100 million less floating around in the economy currently, but says they’ll get through.

"Look, we’re sucking it up where we can and are making the necessary adjustments – we’ll get through."

However, Mr Coull’s optimism is lost on some farmers, who anonymously emailed Paul Henry this morning saying they’re now more fearful than ever for their livelihood.

"Fonterra wrote to us months ago telling us we were being moved to 90-day payment terms - including invoices already waiting to be paid. We are a small local kiwi company working for Fonterra, and this, coupled with the oil price fallout, could kill us."

Previously, suppliers were paid by Fonterra about three weeks after submitting the month's invoice.

DairyNZ estimates the break-even point for most farmers is $5.40kgMS.

Newshub. / NZN