Dairy giant Fonterra says its suppliers can forget about payouts bouncing back up to $5 a kilogram of milk solids.
Chief executive Andrew Ferrier says lower payouts are needed to sustain world demand for dairy products.
The world's largest dairy exporter made a record payout of $5.33 in 2002, but payments have
slipped, to $4.23 for the 2004 season and a forecast $3.85 for the current 2005 season.
Ministry of Agriculture and Forestry analysts have said Fonterra farmers are likely to receive only $3.07 a kg in the year to June 2006.
Asked why there was no talk of lifting payouts from $3.85 a kg milksolids when commodity prices were firm and the US dollar weak, Ferrier said the co-operative's sales strategy would make it less likely payouts would get back up to $5.
"The $3.85 to $4 level is what our analysts tell us is long-term sustainable pricing," he said.
"If you go back three years, when the payout was $5, you had extraordinarily high prices in the marketplace."
Consequently, in some international markets, it burned out demand for dairy products and people started looking for cheaper alternatives. A huge drop in prices followed.
Ferrier said Fonterra, the main player in New Zealand's control of 40 per cent of the dairy produce traded round the world, t wanted to keep international prices within a narrower range.
Fonterra put a lot of research and resources into creating and marketing value-added products which he said would bring higher returns to farmers because they were high profit.
- NZPA
