Wednesday, September 26, 2012

Payout Below $5.00 For Coming Season?

Keith Woodford has written an interesting post. Essentially at current prices with the exchange rate at its current level, farmers should expect a commodity price of below $5.00. 

John Penno the CEO of Synlait, is estimating their final payout for the 2012/2013 season will be $5.00.

In recent years Fonterra, economists and general commentators have been saying that milk prices will be volatile in the future.

Will cows still be selling for $2,000 a cow?
Will land prices fall?
Will this effect the share price of Fonterra shares once TAF is implemented?
When you combine milk price volatility with the recent environment court rulings re: nitrate limits. Will farmers still be paying $40,000/ha for land?
Are we going to see a reduction in farm working expenses for this next season? 

Last time the payout dropped from a record high was in 2009. The payout reduced to $5.00 but farm working expenses didn't fall. The result was cash losses accross the board for the 2009 year.

Lets just hope that farmers are no longer over extended and are able to handle this reduction in payout. 

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