Fonterra's Credit Rating Downgraded

Ratings agency Standard and Poor's has downgraded the credit rating of dairy co-operative Fonterra from A to A-.

In response, Fonterra’s Chief Financial Officer Lukas Paravicini said: “Our underlying financial strength and credit quality remain strong. This is recognised by Standard and Poor’s maintaining our rating in the ‘A’ category and reflects our fundamental strength and financial discipline."

Mr Paravicini said the New Zealand-based Co-operative’s current debt is at expected levels for this stage of the investment cycle, adding that investment over recent years should strengthen the business.

“We have built additional manufacturing capacity in our home base of New Zealand, which is improving returns by giving more product options during the peak production period and our planned investments in China are building our presence in our number one strategic market,” Mr Paravicini said – read more.

US Butter Market Tariffs Raised

The US butter market has become less attractive to traders after the import tariff was raised last week.

The US government increased the import tariff on butter by $510/tonne (to US$2,051/tonne), significantly reducing the current premium available from that market to EU manufacturers.

The EU has increasingly turned to the US to plug the gap caused by the Russian import ban.

Despite the tariff hike, butter sales to the US would still currently offer a better return than selling into Europe, although the margin is now significantly reduced – read more here.