Record Fonterra payout may hit $8.70

GERALD PIDDOCK
Last updated 05:00 10/12/2013

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Economists are predicting Fonterra to lift its milk price by 20-40 cents to $8.50-$8.70 per kilograms of milk solids when it updates its forecast this week.

This would set a new high payout from Fonterra. When an estimated 32 cents per share dividend is added, it would give a forecast cash payout of $8.82-$9.02.

A 30 cent lift from its current milk price forecast of $8.30 would mean an extra $113.5 million for the Waikato economy, and $497.3 million for the country when calculated using the latest New Zealand dairy statistics from LIC and DairyNZ for the 2012-2013 season.

For the average Waikato dairy farmer with a herd of 327 cows milking at 330kg milk solids per cow, the lift would mean an extra $32,373.

Fonterra have to undertake a quarterly review Fonterra's board is required to undertake under the DIRA Act.

ANZ rural economist Con Williams predicted a 20-40 cent increase on the current forecast.

‘I think it's going to be a record, it's just a matter of how high it's going to be," he said.

High international dairy prices were holding. Strong demand from China was a major reason, Williams said.

"A lot of other countries had run down their inventory and were scrambling for product . . . so it looks like its going to stay high or higher for longer," he said.

Williams expected the high prices to remain at least until the peak of the Northern Hemisphere's milk production, in April-May 2014.

BNZ economist Doug Steel believed Fonterra would lift its forecast to $8.60.

"We expect it to be higher at the moment than $8.30. If it's not delivered this time around, then definitely by the end of the season," he said.

Westpac chief economist Dominick Stephens predicted a smaller lift of $8.40, based on softening milk powder auction prices between now and the end of the season.

AgFirst consultant Phil Journeaux was more bullish and predicted an $8.80 payout, based on strong internationalprices.

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- Waikato Times

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