FirstFarms sees milk price staying low for 2015

(Agrimoney) – FirstFarms forecast milk prices staying “low” this year, after the “drastic” drop late in 2014, as the Eastern European farm operator braced investors for a sharp retreat in profits.

The Danish-listed company said that its operating profits, which jumped 72% to DKK19.17m last year, could lose all that ground – and potentially more – in 2015, falling to DKK6m-11m.

The forecast reflected in part expectations of headwinds to its Slovakia-based dairy division, which is expected to produce less milk next year, and receive lower prices, with the group forecasting a continuation of the weakness which has hurt producers worldwide.

Dairy prices on the influential GlobalDiaryTrade auctions, run by New Zealand giant Fonterra, halved in 2014.

“A low milk price is expected in 2015 on basis of the present market conditions for milk products,” FirstFarms said.

Yields ‘close to satisfactory’

The group forecast receiving DKK2.24 per kilogramme for its milk this year, down 16.5% on the last year, despite an agreement to sell through German diary group Fude + Serrahn Milchprodukte, which will see its price linked to those paid in the German market.

And FirstFarms forecast a drop of some 4% in its milk production to 24.2m kilogrammes.

“This is due to a reduction in the herd as the herd was cleared for mycoplasma at the end of 2014,” the group said, revealing a small decline to 2,311 head in milking cow numbers last year.

Production of milk per cow “close to a satisfactory level” by the end of last year, although will likely ease this year as the group moves to two milkings per day from three, in a move to save costs.

Winter crops ‘well established’

The group forecast more stable sales values for its crops, saying that it “expects that the prices in 2015 will correspond to the prices in the spring 2014 and is therefore expected to be at a satisfactory level”.

Winter crops at its farms in both Slovakia and Romania were “well-established”, FarmFutures added.

“There have been satisfactory amounts of rain until the end of 2014.

“A satisfactory yield is therefore expected in the field production in 2015, as long as we get acceptable growth conditions in spring and summer in 2015.”

Earnings up

The comments came as the group unveiled a trebling to DKK8.83m in earnings for 2014, on revenues up 9.5% at DKK125.0m.

The result was “positively influenced by high milk price in the first half of 2014”, and by “satisfactory yields in both Slovakia and Romania”.

The group also received a DKK6.5m pre-tax boost from the sale of 1,788 hectares of land in east Romania, which was “not part of FirstFarms’ long-term land strategy”.

FirstFarms shares closed down 0.7% at DKK 43.80 in Oslo.