Fonterra's final dairy payout pleases Northland farmers

Taurikura dairy farmer Murray Jagger says the final milk payout of $6.52 per kg of milk solids will help farmers reduce their debt. Photo / Michael Cunningham

Although slightly down from the last forecast price, Northland dairy farmers are happy with the final milk payout of $6.52 worth a total of $586.8 million.

But the bulk of the payout will likely be used to pay off debt, with what's left going on farm maintenance.

Dairy giant Fonterra yesterday announced the payout made up of a farmgate milk price of $6.12 per kilo of milk solids and a dividend of 40 cents per share.

A payout of $6.52 will rake in $586.8m for Northland dairy farmers. The last forecast price was $6.75 which, if the final payout, would have earned $607.5m.

Taurikura farmer Murray Jagger said a final payout in the mid to late $6 per kg was expected.

"That was the predicted range Fonterra gave us for the next two to five years and if we can keep our milk price above $6, then farming operations will be sustainable.

"It's hard to run a farm on $4 or $5 price range because farmers are arranging a lot of their debt. It's a difficult job managing milk price expectations in a volatile environment."

Mr Jagger, who is also president of the Whangarei Agricultural and Pastoral Society, said
Fonterra in general was trying hard to meet farmers' expectations in the face of a volatile international dairy market.

He said paying off bank and Fonterra loans would be the priority for farmers because low payout prices over the past two to three years had take a toll on them financially.

"A lot of on-farming expenditure has been delayed so capital works needs to be done and the other focus would be on reducing debt level which is more sustainable now.

"There won't be any more buying of boats and baches as there used to be historically."

Most farmers had taken up a Fonterra loan two years ago which was interest free for two years.

The arrangement was once the dairy payout went over $6 a kg, within two years of taking up the loan, anything over that will go towards debt repayment to Fonterra. Interest on the loan started kicking in from June.

Mr Jagger milks 650 cows on coastal properties on Ody Rd in Taurikura.

Fonterra also announced the forecast total for payout to farmers next season is $6.75.

The company's revenue grew 12 per cent to $19.2 billion while net profit was $745m - down 11 per cent.