Fonterra has further boosted the forecast return to dairy farmers paving the way for a multi-billion dollar payday for the economy.
The co-operative has increased the forecast payout to $7.90 per kilogram of milksolids, having raised it to $7.30 last month.
ASB chief economist Nick Tuffley estimated the
total cash injection would be $9.6 billion this season _ equivalent to about 6 per cent of gross domestic product and up by about $4 billion on last season.
The increase from $7.30 last month alone would be worth an extra $750 million.
"The further increase in the payout does highlight [the] risk of the [Reserve Bank] waiting a little longer than September before cutting interest rates," Tuffley said.
Meanwhile the opening forecast for next season was a record $7 per kilogram of milksolids.
Fonterra chairman Henry van der Heyden said the forecasts gave every reason to be confident about the outlook for the dairy industry.
"This is good news for our farmers to have the extra cash flow at a time when they are facing sharply rising input costs, which DairyNZ confirms are up by 32 per cent over the past year," van der Heyden said.
"It will also go some way to make up for the production lost this season due to the drought."
The final payout the 2007/08 season will be announced in September.
The 2006-2007 payout was $4.46/kg, and Fonterra's previous record payout, $5.33/kg in 2002, was worth $6.14/kg in 2007 dollars.
Some Fonterra farmers have investments in three or four farms and will collect multi-million dollar payouts.
A 1c/kg lift in payout is worth around $1000 to the ``average' farmer and today's hike is expected to lift the average Fonterra farmer payout for the 2007-08 season to around $800,000.
Fonterra signalled in April the potential for further upside in this year's payout, and chairman Henry van der Heyden said today it was satisfying to be able to confirm the increase in view of the current volatile trading environment and unstable financial markets.
The new forecast for the current season is made up of a milk price of $7.55 and a value component of 35 cents.
- ADDITIONAL REPORTING NZPA
