Fonterra lifts milk payout forecast 10c

10:40, Aug 31 2009

Fonterra yesterday lifted its payout forecast for the 2008-09 season by 10c to $5.20 a kilogram of milk solids.

The advance rate to farmers will be increased by 10c from the June payment.

Fonterra chairman Henry van der Heyden said the move reflected the board's desire to do what it could to assist farmer-shareholders during a very difficult year of sharply lower commodity prices.

Fonterra normally announces a revision only when the forecast payout moves by at least 30c.

However, the board wanted to share the news of the higher payout forecast with farmers as soon as possible, Mr van der Heyden said.

Federated Farmers Dairy chairman Lachlan McKenzie said the 10c revision did not sound like much, but for the June payment it would represent $120 million across the industry.

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"Due to changes in Fonterra's payout structure, many farmers would not have had any substantive income until September or October," he said.

"You can imagine that since dairy farmers have to pay wages, electricity, provide winter feed and of course, put food on the table, this revised payout forecast is welcome news."

Westpac chief economist Brendan O'Donovan yesterday echoed that sentiment and said the lift was not unexpected.

Fonterra would not have wanted to go back to the market with "more bad news" and had hedged the last announcement, he said.

Commodity prices had lifted in tandem with the revision, which would have boosted Fonterra's confidence, Mr O'Donovan said.

While the international market was still uncertain, he predicted the final payout to farmers could be better still.

He was tipping somewhere between $5.30 and $5.40/kg of solids, but it was likely Fonterra would "hold a bit of that back".

The Southland Times