Farmlands will not return a rebate to farmers this year amid tough conditions in the rural sector.
In a message to shareholders, chairman Lachie Johnstone and chief executive Peter Reidie said challenges for the rural supplies co-operative mirrored those in the sector.
‘‘This isn't a good year on the farm and, as a consequence, it is not shaping up to be a good one for us either,'' they said.
Last year, the co-operative distributed an $8.2million bonus rebate to shareholders while, in 2014, it was a record $17.6million.
The Farmlands team was ‘‘sharply focused'' on controlling what it could control and it was managing costs ‘‘aggressively''.
The downturn in the dairy sector, in particular, posed the question of whether it was a ‘‘new normal'' being presented or a cyclic downturn.
What was an acceptable way of doing business in the past might not be sustainable in the future.
‘‘Either way, it demands of us that we review our way of doing things ... just as it does on the farm. We're moving to adjust quickly to sharp market downturns in some sectors,'' they said.
A 1.4% fall in this week's GlobalDairyTrade auction emphasised the ‘‘fragile nature'' of the early stage of the dairy price recovery, ASB rural economist Nathan Penny said.
Butter and butter milk prices led the fall, both down 5.5% while skim milk powder prices were also weak. Whole milk powder bucked the trend and posted a 0.7% rise.
The recovery was predicated on a global production growth weakening but, at this juncture, dairy buyers were not convinced the supply correction was happening.
That was expected to change and, through the middle of 2016, monthly EU production data would slow towards zero on an annual change basis.
The latest production data showed New Zealand milk production was down 1.7% for the season to March, and it looked as if full-season production could be down around 2%, Westpac senior economist Anne Boniface said.
The drop was due to a combination of fewer cows, less spending on supplementary feed and fertiliser, and a focus on trimming on-farm costs as much as possible.
Many of those influences were likely to flow into next season. Farmers' budgets would remain under pressure and most would struggle to get their cashflows out of the red and back into positive territory, even if next year's payout was a little higher than this year.
It meant on-farm costs would remain firmly in the spotlight and that production levels could continue to fall, she said.
Dairy prices, notably butter, cheese and casein, weighed heavily on last month's ANZ commodity price index, which fell by a further 0.8% to be back 16.8% year-on-year.
ANZ agri economist Con Williams said those products had been under pressure in recent months as northern hemisphere inventories built up. US cheese inventory levels recently hit 10-year highs, meaning more of that product could start seeping into tradeable supply.
