Fonterra yesterday lifted its forecast payout to dairy farmers by 35c to a record $8.65 per kilogram of milksolids.

The increase - along with a previously announced estimated dividend of 10c a share - amounts to a forecast cash payout of $8.75kgMS.

The increase will boost earnings by Northland's 1000 dairy farmers by an estimated $35 million to about $865 million for the 2013/14 season.

The extra cash will provide icing on the cake for eastern Northland farmers who have had sufficient rain, and it will help Kaipara farmers and others in dry spots around the region to withstand the effects of drought conditions which have already forced them to dry off cows.


"There is nothing on the paddocks on the west coast," Farmers of New Zealand operations director Bill Guest said yesterday.

"I'm pleased Fonterra has increased the payout forecast as west coast farmers face lean months before they start getting decent milk cheques in September or October."

Fonterra chairman John Wilson said the higher forecast was good news for farmers and for New Zealand.

"The increase reflects continuing strong demand for milk powders globally," he said.

"Last December, the Fonterra board approved a forecast farmgate milk price that was 70c kgMS below the price that had been calculated in accordance with the Milk Price Manual.

"We are maintaining this position, with yesterday's forecast being 70c lower than the $9.35 milk price derived under the Milk Price Manual."

Mr Wilson said the board had the discretion to pay a lower farmgate milk price than that specified under the manual if it is in the best interests of the co-operative.

The board has also approved an increase in the advance rate schedule of monthly payments to farmer shareholders. Payments from March through to June will be 25c kgMS higher than the previously published schedule.

"We will provide an update on business performance when we announce our interim result on March 26," Mr Wilson said.

Fonterra is required to consider farmgate milk prices every quarter as part of the Dairy Industry Restructuring Act .