Waikato farmer John Bluett says his income will be up 8 per cent on last year. Photo / Sarah Ivey
Fonterra's 11,600 dairy farmers are getting a healthy bonus - but those at grassroots level are refusing to get too excited by the increased payout.
Company chief executive Andrew Ferrier announced yesterday that Fonterra's already-bulging revenues had fattened to $13.9 billion this year. He put the result down
to high global commodity prices for dairy produce as world supply shortens and demand increases.
Down on the farm the revenue boost means farmers can expect thousands more on their 2006 income. It means the average income for Fonterra's farmer shareholders - all 11,600 of them - has climbed to about $480,000.
At Hukerenui in Northland Evan Smeath was unaware of the payout news when contacted during milking yesterday.
"That's pretty good news and has given me quite a good lift."
Earlier this month his farm was flooded for a second time in three months. "We had about 60 hectares under water, and about 30 hectares has had quite a bit of damage, we've been refertilising today." The payout surprise will take his revenue to about $401,000.
The extra money would be spent bringing the condition of the farm back to its previous standard before this year's floods.
Waikato farmer John Bluett, who milks 950 cows, said his income would be up 8 per cent on last year. He expected to bank $1.25 million in August. But the money would be reinvested, rather than splashed around on new cars or luxurious holidays in the sun. He planned to spend more than $200,000 on paths, fencing and an underpass.
High revenues did not necessarily mean farmers were making pots of money, he said.
The cost of production had ballooned over recent seasons. "This season we've probably had a 20 per cent rise in the cost of nitrogen, and about a 15 per cent rise in fertiliser. Energy costs have increased with fuel coming through."
Farm contractors, including those who produce silage from hay and maize, were also putting increased pressure on costs.
He was considering an overseas trip later in the year, however.
"We've had quite a few overseas trips over the years, to Australia, China and Hong Kong, and we'll probably do one in November to Hong Kong. It's not the dollars for us, it's the time to find in which to do that."
Waerenga (near Te Kauwhata) farmer Jim Cotman said farmers "absolutely" deserved to give themselves a decent break and the increased payout would help many do just that.
Farmers were not "35-hours a week" workers and rewarding themselves with a new car, holiday, or some kind of other recreational pursuit was essential, he said.
Farmers' and Fonterra's role in the economy was significant, Mr Cotman said, but he took exception to his industry being singled out for the current economic climate.
"I certainly don't like being blamed for the high dollar by Bollard and Cullen, because we've been restrained up until now. We haven't even seen any money yet."
While most farmers could stand the high dollar in the short term, "New Zealand could do a hell of a lot better" if a lid was kept on interest rates and the dollar.
It had to be remembered that $2.5 million farms often came with large loans, with many farmers leveraged at 60 per cent debt.
"My son bought a farm three years ago, 250 cows, and that mortgage is a big noose around his neck."
Mounting debt was on the horizon if Reserve Bank Governor Alan Bollard hiked interest rates today.
Fonterra has forecast an even bigger payout next year.
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