While the country pauses to gaze at the crystal ball of Budget 2016 tomorrow, many regions will be anxiously awaiting Fonterra's new season payout forecasts.
Fonterra starts tomorrow's business day, followed by the Budget after 2pm, but the New Zealand stock exchange will be having its busiest day of the reporting season, with up to five companies expected to report.
Arguably, Fonterra's forecast for the 2016-17 season will be more important to the debt-laden, cash-strapped dairy sectors of regional New Zealand than the politicians' number-crunching exercise.
While Fonterra's payout stands at $3.90 per kilogram of milk solids, leaving a large majority of farmers facing a third season in the red, Fonterra is expected to set the new season price around $4.60.
ASB rural economist Nathan Penny expects Fonterra to make no change to the current $3.90 forecast, but to open its 2016-17 forecast at around $4.80, and eventually lift to $6, depending on several factors.
"In particular, our view is contingent on global dairy supply growth slowing further this year as low milk prices weigh on farm cashflows,'' he said.
While New Zealand and Australian milk supply was already on the way down, the market also needed more evidence that the European Union supply growth was slowing.
Mr Penny predicted if he was right about declining production across New Zealand, Australia and the European Union, he expected the 2016-17 price to ultimately end up at $6.
"However, either way and given low initial advances to farmers, farm cashflows will remain very tight well into 2017,'' he said.
He expects Fonterra to aim towards the higher end of the $4.60 to $4.80 payout range, to support farm cashflows, noting it had already brought forward dividend payments and offered an interest-free loan.
"However, if Fonterra prefers a more conservative milk price forecast, it may still address tight cashflows by paying advance rates to farmers at the higher [end] of the normal ranges of 65% to 75%,'' Mr Penny said.
Expected to report tomorrow is bellwether freight company Mainfreight, Dunedin-based cancer diagnostic Pacific Edge and Metro Performance Glass, Argosy Property and Stride Property.
On Metro Performance Glass, Forsyth Barr broker Suzanne Kinnaird said given the favourable underlying construction backdrop, she was expecting a "robust'' more than 12% gain on revenue growth to $189 million for the company's full year to March result.
She expects earnings before interest, tax, depreciation and amortisation to be "broadly flat'' on the prior period last year at $39 million, while after-tax profit is expected to be in middle of the company's $20 million to $22 million guidance range.
Mrs Kinnaird said double-digit growth continued to be a feature of residential consents.
"While the lag associated with work put in place has pushed out to about 10 months, the volume and revenue outlook should be extremely favourable,'' she said.
Pacific Edge has made huge inroads into establishing itself in its target US market, but brokers will be looking for evidence that sales are beginning to gain traction and creating cashflow, given its spending of more than $55 million since listing in 2003 and never having turned a profit.
It was successful in raising $35.3 million capital in July last year.
