Record payout 'godsend'

By Mike Barrington

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Financial caution is urged even if Fonterra milk payout forecasts look likely to bail farmers out of the debt caused by last summer's drought. Photo / File
Financial caution is urged even if Fonterra milk payout forecasts look likely to bail farmers out of the debt caused by last summer's drought. Photo / File

Fonterra milk payout forecasts which could increase dairy farmers' incomes by almost 50 per cent are at "really scary levels" says Northland Federated Farmers dairy section chairman Ashley Cullen.

While it would be "an absolute godsend" if Northland dairy farmers' earnings increased from an estimated average $616,000 each last season to $862,000 in the present season, Mr Cullen yesterday warned farmers could not count on getting the big pay rise until it was in their bank accounts in October next year.

The Fonterra farmgate milk price for the season which ended on May 30 was $5.84 a kilogram of milksolids. Together with a 32c share dividend, a cash payout of $6.16kgMS announced yesterday earned Northland's 980 dairy farmers producing an average 100,000kgMS an estimated $616,000 each - and brought $603 million into the region.

Fonterra opened the 2013-14 season on June 1 by increasing the payout forecast by $1.20 to $7kgMS, bumped it up 50c to $7.50kgMS in July, added another 30c to reach $7.80kgMS late last month, and this week increased the predicted payout by 50c to a record $8.30kgMS.

This forecast farmgate milk price - along with an estimated dividend of 32c a share - amounts to a forecast cash payout for 2014 of $8.62kgMS.

At this rate the average Northland dairy farmer producing 100,000kgMS would earn $862,000 - $259,000 more than last season.

And dairying would bring $844 million into the region - $241 million more than last season.

However, Mr Cullen said it was difficult to come to terms with the quick increase in the forecast payout, particularly when the NZ dollar was so high.

"We've had our fingers burnt before," he said, advising financial caution even though prospects looked promising for a boomer season to bail farmers out of the debt caused by last summer's drought.

Northland Chamber of Commerce CEO Tony Collins said it would be pleasing to see farmers pay off drought debt and for the region's GDP to remain positive.

Fonterra chairman John Wilson said the record forecast farmgate milk price reflected continuing strong international prices for dairy products although the industry still faced "headwinds".

- NORTHERN ADVOCATE

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