Fonterra cuts farmgate milk price to 27.8c/l
Fonterra has announced that it has reduced its forecast farmgate milk price and also issued a financial trading update.

Fonterra has announced it has reduced its forecast farmgate milk price for the 2017/18 season from $6.75 to $6.40/kgMS, the equivalent of 27.8c/l in Irish constituents.

It also updated the market on its financial results for the first three months of the 2018 financial year.

Chairman John Wilson said the lower forecast farmgate milk price reflects a “prudent approach to ongoing volatility in the global dairy market”.

The Global Dairy Trade price for whole milk powder (WMP) is a big influencer of the farmgate milk price and it has declined by almost 10% since 1 August 2017.

“While the result of the arbitration with Danone has impacted our earnings guidance for the season, it has no influence on our forecast farmgate milk price.

“What is driving this forecast is that despite demand for dairy remaining strong, particularly in China, other parts of Asia and Latin America, we are seeing strong production out of Europe and continued high levels of EU intervention stockpiles of skim milk powder.

“This downward pressure on global prices is being partly offset by the lower NZ-US dollar exchange rate,” Wilson said.

Confidence in demand

Wilson said that Fonterra’s strong financial position, customer order book at this point in the year, and confidence in demand means that the board is able to increase the payments made in January by 10c/kgMS and will hold the advance rate through to the payments in May.

“In effect, our farmers will receive equal or higher payments for their milk over this period than were scheduled under the previous $6.75 milk price.”

Fonterra has also updated its full season New Zealand milk collection forecast due to ongoing challenging weather conditions.

The co-op has reduced its forecast by 1% to 1.525m kgMS – the same volume as last season.

Financial results

Revenues in the first quarter at Fonterra were up 4% on the same period last year to NZ$4 billion.

Sales volumes are down 20% to 3.9 billion liquid milk equivalent (LME), while the gross margin of 16.7% is also down, it said in a trading update.

Chief Executive Theo Spierings says the first quarter financial results were generally as expected as the co-op started the year with record low inventory followed by the second year of low spring milk collections from New Zealand due to wet weather.

“This has challenged our Ingredients business where we had lower volumes to sell. As a result, sales were down 19% to 3.6 billion LMEs compared to the same time last year.

“The gross margin in ingredients was in line with the second half of last year.”

However, when we compare it to the same period last year it was down from 12.1% to 8.1%, mainly due to the rise in commodity prices.

“Our consumer and food service business continued with strong sales volumes in our key markets across both Greater China and Asia with, overall, just a 3% decline to 1.3 billion LMEs in total volume compared to the record levels at the same time last year.

“Gross margin in consumer and food service was 24%. While this is down on the 31% in the first quarter of 2017 when input costs were lower, it is up on the gross margin percentage in the last quarter of 2017.

“This positive trend demonstrates we can create more value in our Consumer and Foodservice business despite higher input costs and reflects the strength of our strategy of moving more volume into higher value.”

Spierings said Fonterra expected performance to be weighted to the second half of the year and remains confident in its full year forecasts following revisions after the recent Danone announcement.

“We are focused on continued tight operational and financial discipline and a keen eye on our customers’ needs to maximise sales opportunities.”

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Farm Safety Week 2018 to focus on safety goals
Monday marks the start of the sixth annual farm safety week in Ireland and the UK, an initiative organised by the IFA. The message for this year’s campaign is: Your Health. Your Safety. Your Choice.

Farm Safety Week 2018, organised by the IFA, aimed at reducing farm accidents nationwide, is taking a slightly different approach this year.

Rather than focusing on agriculture’s poor safety record and stories of things going wrong, the campaign will highlight stories of when things go right, sharing good practices and demonstrating what "good safety" looks like.

Your Health. Your Safety. Your Choice

Farming continues to have one of the poorest safety records of any sector in Ireland. Last year 24 people lost their lives in farm accidents and 11 people have lost their lives so far in 2018.

Farm Safety Week is supported by a number of agencies, including the Health and Safety Authority (HSA) and members of the Farm Safety Partnership Advisory Committee.

Commenting on the initiative, IFA president Joe Healy said that these “statistics are stark, but statistics don’t tell the whole story – they don’t tell you about the devastating impact a farm fatality has on families and communities; they don’t tell you the impact a farm accident can have on the rest of your life, on your ability to run the farm”.

New IFA farm safety initiative and health and safety appointment

This year the IFA is appointing a farm health and safety executive to implement a pilot farmer-to-farmer peer learning initiative at branch level, to advise farmers about potential risks and educate them to become safety ambassadors within their communities.

The farmers who get involved in the initiative will help to mentor each other by, for example, walking each other’s farms to identify potential risks and visualise how safety works in a real life situation.

This kind of informal learning has been shown to be effective, because the people involved have the potential to adapt the programme to meet their needs and develop their own approaches to improving safety on the farm, according to the association’s president.

Farmers must take responsibility to prioritise safety, especially when working with tractors and machinery, which are the biggest cause of fatal accidents

Under new management

William Shortall has been appointed as IFA health and safety executive to lead farm safety promotion and the new peer-to-peer mentoring initiative.

Shorthall has worked as a regional development officer with the IFA since 2007. He holds a diploma in agricultural engineering and has recently completed a higher diploma in safety, health and welfare at work. He will formally take up the new role on 1 September.

Sharon McGuinness, chief executive of the Health and Safety Authority, believes that “farming is still the most dangerous sector in which to work, although awareness of the issues is high”.

Minister for Agriculture Michael Creed has commented that "there are a lot of risks in farming, but farming doesn’t have to be a dangerous occupation if you are aware of the risks. We have definitely seen an increased awareness of farm safety, thanks to initiatives like Farm Safety Week”.

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Kerry Group announces milk price for June
Kerry Group is the most recent processor to announce its milk price.

Kerry Group has announced it will be holding its base milk price for June at 29.4c/l excluding VAT.

Lakeland and Glanbia

Lakeland Dairies, the first processor to announce its June milk price, opted to hold its base price at 30.15c/l excluding VAT.

Glanbia Ireland has increased its base milk price to 29.4c/l. Co-op members will also receive a drought support payment of 1c/l.

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