Northland dairy farmers optimistic of a good payout

Northland dairy farmers are optimistic of a revised milk payout price in the mid- to high $6 per kilogram of milk solids. Photo / John Stone

An announcement on the revised forecast farmgate milk price is imminent and Northland dairy farmers hope the figure is in the mid- to high $6 per kilogram this week's global dairy auction.

Wholemilk powder prices, which have the greatest bearing on Fonterra's farmgate milk, rose by 4.9 per cent to US$3593 ($5035) a tonne, well ahead of the generally accepted comfort level of around US$3000 a tonne.

Fonterra last month increased its 2016/17 farmgate milk price by 75 cents to $6 per kg of milk solids (kgMS).

Combined with the forecast earnings per share range of 50c to 60c, the total payout available to Fonterra farmers in the current season is forecast to be $6.50 to $6.60kgMS before retentions.

A payout of $6kgMS will earn Northland dairy farmers $540 million, $6.50 will rake in $585m, while $6.60 will yield $594m.

Prices have now risen above the level needed for most dairy farmers to break even, following two consecutive seasons of losses, amid lower supply.

Forecast farmgate milk prices are announced every quarter as required by the Dairy Restructuring Act.

The final price for 2016/17 will be announced in September.

Titoki dairy farmer and former Fonterra board member, Richard Booth, said the dairy price recovery looked reasonably solid this season and he expected a slight lift to the forecast price of $6kgMS earlier forecast.

"The further we get this season the more sustained commodity prices will be. I'd expect a payout in the mid- to high $6," he said.

Mr Booth said debt repayment would be the priority for most dairy farmers in Northland before other expenses such as the purchase of supplementary feed if dry weather continued.

The $8.40 dairy farmers received during the 2013/14 season was a record high and injected $748m into Northland's economy.

Analysts in a BusinessDesk survey are expecting the payout to be between $6kgMS and $6.50kgMS.