Fonterra New Zealand cut the price of milk at the farm level because the virus meets demand | Instant News


PHOTO PHOTO: The Fonterra logo is seen near the Fonterra Te Rapa factory near Hamilton 6 August 2013. REUTERS / Nigel Marple / Photo File

(Reuters) – Fonterra (FCG.NZ) said the coronavirus pandemic was “unlike anything we have ever experienced before” because the world’s largest milk exporter cut prices farmers pay for milk for the coming season with demand collapsing due to restrictions caused by the virus.

“COVID-19 has affected almost every country, market and industry, and as a result, the global dairy market is fluctuating and the outlook is uncertain,” Chief Executive Officer Miles Hurrell said in a statement.

But the third quarter update on Thursday left investors, many of whom were farmers, happy with shares rising 1.7% to NZ $ 3.65, outpacing broader markets .NZ50.

The Auckland-based company estimates the price of agricultural milk between NZ $ 5.4 to NZ $ 6.9 per kilogram of milk solids (kgMS) for the 2020-21 season, lower than the current season, which was revised to NZ $ 7, 1 – NZ $ 7.3, from NZ $ 7-NZ $ 7.60.

“In a larger scheme, we see one of the biggest declines in the global economy in the last century. If in that case, farmers come out with a payment of $ 6 per kilo, they might feel quite happy with it, “said Michael Gordon, a senior economist based in New Zealand at Westpac.

With much of the world still reeling from the effects of the lockdown, the food service sector in China, Fonterra’s main market and where the outbreak was first detected, soared quickly and most have returned to normal levels in March and April, the company said.

Fonterra, which has refocused on New Zealand after bad global expansion, reported a nearly 59% increase in the nine months of operating income that underlies to be NZ $ 815 million ($ 500.8 million) due to contracts agreed this season.

Hurrell said at a conference call later that Fonterra did not plan to fire the current staff.

This maintains an estimated full-year basic income of between 15 and 25 New Zealand cents per share.

Reporting by Shruti Sonal and Nikhil Kurian Nainan in Bengaluru; Editing by Sriraj Kalluvila and Kim Coghill

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