Originally Posted by
NZSilver
Agree with you Roger, Fonterra costs have blown out, there is a disconnect between the company and its owners and it is ridiculous that it is headquartered in Auckland (why not in a dairy region!). Fonterra benefited from the high payout due to first mover advantage and being setup for milk powder production when china came along in the search for protein to feed its massively booming middle class, however other countiries are catching up. Yes there are issues that havnt helped ie - dairy ban in russia from europe but the fault cant lie solely on these issues.
The people I feel for are the young lower order share milkers and first year 50:50 share milkers with very little assets, probably large overdrafts and mortgages to get started and still having high fixed costs and having to work the very long hours, all this to end the year $10,000's - $100'000s in the the red. (now all of those high flying fonterra employees who have tripled over the last few years - without actually growing the business much get there big pay packets). People who own farms and have a high proportion of equity will be able to ride out the hard times for several years, except those with a high percentage of debt on their land. But I'm sure it will a fair few dairy farming operations back to a low cost structure resulting in NZ becoming very competitive again thus squeezing overseas competitors, reducing world supply and increasing the payout, as many operations have become very high cost with the good payout years. The low NZD will also help and hopefully the Russians might get some NZ cheese again in the near future when Putin and the west sort their differences!