November 17,2015-
Saputo’s Earnings Down 4.6% – Canadian Company Has Plants In Tulare – Concern Over Dairy Price Slump
Dairy operators are suffering this fall as stubbornly low milk prices are not rising as hoped. World prices are to blame as are the high value of the dollar affecting our milk exports. The latest evidence comes from lower earnings at Saputo Inc with several plants in Tulare. This week Canadian based Saputo recorded lower adjusted earnings for the second quarter of fiscal 2016. The company’s earnings totaled $148.6 million, decreasing $7.1 million from the same quarter last year, or 4.6 per cent. The company said falling dairy prices in the U.S. shaved $229 million off its bottom line.
This week the cheese market showed continued weakness with prices down to $1.44/lb, lowest since late 2010 during the worst of the dairy slump. On the bright side, butter prices are strong. Some processors are reporting a milk shortfall as statewide production is down 4%.
“I think production will stabilize” says local dairyman Tom Barcellos. “The dairy industry here is not going to go away.”
Farm Credit West Building New Dinuba Office – Announces Merger
Ag lender Farm Credit West is building a new Dinuba office at 940 W El Monte relocating their current smaller office they have been in since 2004.The company expects to move.in by early 2016.
In September, 2015, the stockholders of Farm Credit West and Farm Credit Services Southwest approved a merger. Final regulatory approval for the Plan of Merger was received in late October, 2015. Southwest has branch offices in Tempe, Yuma and Safford, Arizona and an office in California’s Imperial Valley. To give some perspective, the combined Farm Credit West and Southwest assets totaled $9.0 billion at September 30, 2015, which includes an $8.5 billion diversified portfolio of agricultural loans across three western states.
Mixed Picture For Local Ag Economy
In their report to stockholders Farm Credit West made these comments on the local farm economy.
“Tree nuts are the largest commodity concentration in FCW’s loan portfolio at 16.2%. Almonds and pistachio prices have remained relatively strong, but walnut prices dropped significantly due to weakening exports. Water availability continues to be a concern for this segment of our portfolio. Also, a continued strong U.S. dollar may further weaken export demand.
FCW’s dairy portfolio is the second largest commodity concentration in our loan portfolio at 13.2%. Overall the dairy industry did fairly well last year as record-high milk prices helped most dairy customers to rebuild liquidity in their operations. The drought conditions in California have increased forage prices which tends to reduce margins for dairy producers. With lower milk prices and higher forage costs in 2015, many producers are at or near break even, adding some stress to this portfolio.”