KEY POINTS:
Fonterra farmers were breathing a collective sigh of relief yesterday after the co-op held its payout forecast for this season at $4.05/kg of milksolids, despite a strong dollar.
There had been fears that the forecast would dip because of the currency's strength but better commodity prices have helped
hold the line.
The board had agreed to a "one-off autumn premium" for extra milk produced towards the end of the season, providing a potential boost for struggling cockies.
Details of the premium, which are still being completed, will be announced next week.
It aims to encourage production to help the co-op capitalise further on higher commodity prices in the next six months.
Prices are being held up by factors such as the Australian drought.
"So we're trying to get that very accurate market signal out," said chairman Henry van der Heyden.
"Fonterra has confidence that we can quickly convert any increased autumn production into sales before the end of the season.
"We would expect that farmers who are in a position to increase supply will take advantage of this opportunity after weighing up the costs involved."
It was too soon to say how much the premium for extra milk would be but it would be significantly more than a few cents a kilogram, he said.
Van der Heyden said the predicted value-add portion of payout - reflecting returns from business such as branded consumer goods - was also stable at 45c/kg, even though margins in this area were under "increasing pressure".
Fonterra Shareholders Council chairman John Monaghan said farmers would be relieved at the steady forecast.
"Farmers are under increasing economic pressure and they will be ever-optimistic for further increases throughout the season."
But the co-op also predicted that the present $6.56 share price would remain the same for next season, raising the prospect of no inter-season capital gain on the shares for the first time in Fonterra's history.
That is despite $6.91 being the mid-point of a forecast share price range for next season - the mid-point is the usual basis for setting the price.
But Fonterra insisted it was taking a "prudent" approach in holding the predicted share price until a review of tax issues was completed in May - this implies it might rise after that.
Monaghan said he was not concerned at the flat share price prediction at this stage, although he expected some farmers to be "surprised that they have decided not to opt for that mid-point".
Dairy Equity - which is offering farmers cash for beneficial rights to their Fonterra shares - said it was assessing the impact of the co-op's announcement on the price Dairy Equity was prepared to pay, said manager Geoff Taylor.
He was surprised Fonterra still expected to deliver 45c/kg of value-added returns.
"We doubt whether that will be delivered."
The company agreed with Fonterra keeping the share price indication at the lower end of the independent valuer's range, and said it was significant that no change was forecast.
"Fonterra have never forecast a nil increase in the share value before."
He expected Dairy Equity would bring its present offer of $6.80 a share down towards $6.50.
EXTRA BONUS
Farmers are welcoming news Fonterra is holding this season's forecast payout at $4.05/kg of milksolids, as higher commodity prices help offset a strong dollar.
Farmers are also due to get a special payment for any extra end-of-season production that helps the co-op capitalise on higher commodity prices - being propped up by factors such as the Australian drought.
However, the co-op's share price for next season is predicted to be flat, although this may change after a review of tax issues.