* Fonterra cuts forecast farmer payout by 14 pct
* Cites slowing demand, high stocks, lower prices
* NZ dollar falls about quarter of a cent
(Adds quotes, currency reaction)
WELLINGTON, July 29 New Zealand dairy giant
Fonterra Ltd cut its forecast payout to its suppliers
in the new season by 14 percent because of tumbling world prices
and a high exchange rate.
The world's largest dairy exporter, also New Zealand's
largest company, said on Tuesday it was reducing its 2014/15
payout price to NZ$6.00 ($5.12) a kilo of milk solids from an
initial forecast of NZ$7.00 made in May.
Fonterra said it was expecting a dividend from its consumer
operations of 20 to 25 NZ cents, which is on top of the milk
price it pays farmer suppliers.
"We have seen strong production globally, a build-up of
inventory in China, and falling demand in some emerging markets
in response to high dairy commodity prices," Fonterra chairman
John Wilson said in a statement.
Dairy prices have fallen 34 percent in Fonterra's global
auctions since February, while the New Zealand dollar touched a
near three-year high in mid-July.
Fonterra said it expected to see some improvement in prices
later in the season.
The kiwi dollar, which is sensitive to the fortunes of the
dairy industry which earns nearly a third of the country's
export earnings, fell to a six-week low of $0.8516 from $0.8544
after the announcement.
Fonterra paid out a record NZ$8.40 per kilo in the 2013/14
season on the back of surging demand from China, which drove
The latest forecast represents a drop of about NZ$4.3
billion in the country's earnings, equivalent to about 1.9
percent of gross domestic product.
"At this stage of the season, the final payout remains very
uncertain," Westpac chief economist Dominick Stevens said.
"We do expect a very substantial recovery in auction prices,
but not until the last quarter of this year. Presumably,
Fonterra's assumptions are similar."
For Fonterra, which processes around 80 percent of all milk
produced in New Zealand, a reduced payout would lower input
costs and help to improve margins for its consumer products such
The 2014/15 dairy production season is about to start and
Fonterra updates its payout forecast quarterly through the
($1 = 1.1727 New Zealand Dollars)
(Reporting by Gyles Beckford; Editing by Stephen Coates)