Fonterra lifts payout by 10 cents to $5.20

Fonterra says it has clawed back sufficient gains on this season's milkflows to lift its forecast payout to farmers by 10c per kg of milksolids to $5.20 per kg.

The payout will be lifted from the most recent projection of $5.10 per kg, which was 35 per cent less than the record $7.90 its 10,700 farmers received last season, when their cheques averaged more than $800,000 per farmer.

The world's biggest dairy trader, Fonterra said last month it expected dairy production to rise as much as 5 per cent this year, which suggests this season's milksolids production will be 1.259 million kg. The higher forecast payout makes a change for farmers after Fonterra slashed its forecast three times in the four months to January. The new figure comprises a milk price of $4.75 and an unchanged added value forecast of 45c per kg milksolids.

Fonterra chairman Henry van der Heyden said the advance payment to farmers would be lifted by 10c in June, because directors wanted to help farmer-shareholders during a difficult year of sharply lower commodity prices.

"Normally, Fonterra only announces a revision when the forecast payout moves by at least 30c per kg from the previous forecast, but the board wanted to share the news of the higher payout forecast with farmers as soon as possible," he said.

Though international dairy markets remained uncertain and volatile, some encouraging signs of increased stability were emerging.

Powder prices set at Fonterra's internet auctions had increased and sales based on these prices had brought the "cautious optimism" necessary to signal a modest increase in payout.

But van der Heyden warned the farmers should expect some level of retentions from the payout if the final amount available for payout exceeded $5.20.

"We need to tread a fine line between maximising payout to our farmers and strengthening the cooperative's balance sheet in these uncertain and challenging financial times," he said.

"Retentions will be considered if the eventual payout is higher."

Fonterra has an annual turnover of about $17 billion, and reported revenues of $19.5 billion for the 14 months to July 31, 2008.

- NZPA