The Weekly Dairy Report: All eyes on tonights auction as the reality of the downturn starts to bite.

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The Weekly Dairy Report

More variability of rain received this week, as moisture levels improve in many areas of NZ, but fail to stimulate grass in others.

Temperatures are dropping and the days are now autumnal, as managers look to extend round length, plan when to dry off, and stimulate pastures with nitrogen fertilizer.

Managers are reminded to plan feed, back from this years calving date, so this seasons production does not compromise next years.

Body condition scores of cows and time needed to return animals to calving condition is the calculation advisers suggest, and northern managers are also warned to watch out for facial excema and theileria outbreaks.

Disappointment at Fonterra’s half year result for shareholders, as the predicted payout remained stable, but in a surprise, the dividend fell and shares dropped to an all time low.

Reports surfaced of big waiting lists of grumpy shareholders ready to supply alternative milk processors, as some farmers are looking to cash up their shares, as they aim to ease the financial burden of the dairy downturn.

Synlait increased their predicted payout to $4.50-$4.70 and Westland held theirs at $5-$5.40 to illustrate big is not always better, and remind Fonterra they need to balance expansion plans with ensuring shareholders get a good return on their investment.

Costs have now risen to $5.40/kg ms, and with the drought sure to push the costs of wintering higher, cashflows of many operators will soon come under significant pressure.

More nervousness in the market place, as confusion on where the extra volumes offered in the global dairytrade auction by Fonterra came from, resulted in a drop in dairy future values.

Tomorrows global dairytrade auction result will again be watched with intense interest, as if the upturn is slower than anticipated, next years optimistic price predictions  could be trimmed as well.

An announcement that Fonterra will be launching an Equity Partners fund at the end of the year, will be viewed positively by this capital hungry sector.