Dairy company Synlait Milk has slashed its forecast milk payout to its farmers this season, catching some by complete surprise.
Photo: AFP
The Canterbury-based company announced on Monday morning that it is dropping its forecast payout to $4.40 per kilo of milksolids - down from $5 - due to low prices on the global market.
Synlait managing director John Penno said the low payout meant Synlait's farmers would do it tough this season.
"So it's not specific to our farmers. Our farmers will end up getting pretty much what all farmers in the industry do.
"That said, it's going to be tough, and there's no news in that. This has been well signalled, this is a major downturn for the industry," he said.
Dr Penno said cyclical downturns happened, just as cyclical upswings happened.
"I think farmers are well prepared for it, they're coming off a very good year last year and they're good financial managers. They're watching what's happening and they'll be managing their farms accordingly.
"But there will be farms out there that lose money, and they'll have to manage their way through that situation but what we're all hoping is that next year will be much better."
Dr Penno said while Synlait's farmers were coping well with the dry conditions in Canterbury, if the dry weather continued it could further complicate matters.
"They'll have an impact through higher feed prices, and if it goes on eventually it will affect production as well.
"However, we would still maintain that it's quite difficult to tell for our farmers - they're well irrigated, we're not seeing big falls in production and actually we're ahead on milk production in the season-to-date."
Didn't see it coming
Dairy farmer and Synlait supplier Willy Leferink said he did not see the fall in forecast payout coming.
He believed Synlait could have done a better job of giving farmers a heads-up that a 60c drop in their payout was on the way.
Mr Leferink said the season was rapidly becoming one to forget.
"We can't do a lot or else we're going to compromise next year's production. Hopefully next season will be a lot better," he said.