The value of units in the listed Fonterra Shareholder Fund (FSF) continue to plumb new lows, having struck $5.04 during the week, before retracing to about $5.15 yesterday.
In the wake of a week of poor news for the dairy industry, continued lacklustre expectations on the end-of-season farmers' payout, and predictions for next year, the units hit a new low of $5.04 on Thursday, following the results from the fortnightly Global Dairy Trade (GDT) auction.
At present pay-out expectations of $4.90 to $5 for both the per-kilogram payout and dividend, analysts have estimated there will be $6.5 billion to $7 billion wiped from the economy, compared with last year.
The GDT auction prices this week were down for their third consecutive fortnight - overall down 3.6%.
Craigs Investment Partners broker Peter McIntyre said with increasing downward commodity price pressure on the sector, ''New Zealand has lost its competitive advantage and something has to give''.
However, with dairy farm land prices holding up, Mr McIntyre said it was the value of the publicly traded FSF units, and the similarly priced but separate, privately-held, farmer-owned Fonterra shares, which were seeing the downward pressure.
''Of the two components, dairy land prices are not giving up, but the FSF units and [private] Fonterra shares are,'' he said.
The FSF units are linked to Fonterra branded products, not farm milk production, and when dairy prices are low the products should be enjoying a boost to profit margins.
Mr McIntyre said recent research by Infometrics said that at Fonterra's first full season in 2003 it collected 96% of the country's milk, but by 2013 that had declined to 88%, and for the first six months of the 2014 season that had softened further to 87%.
''Fonterra has been riding a wave of a high price cycle during the past decade, but between GDT, the pay-out and increasing competition it's losing its edge.
''The industry has become fragmented and farmers now have more choice,'' he said.
Dairy commodities, as with oil and iron ore prices, had been driven by high Chinese demand during the past decade, but that cycle was at an end as China attempted to moderate its growth, to contain inflation and tackle its own housing issues.
