Fonterra has lifted its payout forecast to its farmers by 55 cents to $5.10 per kilo of milk solids.
Fonterra chairman, Henry van der Heyden, said the revised forecast for the 2009/2010 season reflected "a sustained improvement in commodity returns and a more positive outlook in international dairy markets."
He said farmers would begin to benefit from the higher payout forecast from next month, with a lift in the co-operative's "Advance Rate" payments to farmer-suppliers.
The increased payout is made up of the milk price component increasing 60 cents to $4.60 and the value return portion falling 5 cents to 50 cents per kilo of milk solids.
"We've had really tight cash flows on farms going into this season, and some serious belt tightening to get through. This will give our farmers a bit of relief and some extra flexibility to get the best out of their farms this
year."
The Fonterra Shareholders' Council said today's announcement of a 55 cent payout increase was "encouraging news for farmers".
"This will provide a much needed boost for our farmers at a time when they can really benefit from a rise in payout," said council chairman Blue Read.
"Receiving this signal relatively early on should help our farmers to plan their farm operations with confidence for the rest of the season."
Fonterra chief executive , Andrew Ferrier said the strong increases in prices for whole milk powder at the recent auctions showed "a broad strengthening of demand and robust recovery in international dairy prices."
"What we're seeing in the international market is the firming of a trend, with a more positive sentiment and stronger demand, producing better pricing across the board.
Whole milk powder prices have been leading the way, with the prices for other dairy commodities now all moving in the right direction."
The forecast payout increase was good news for its New Zealand farmers, but "we remain in a period of extreme price volatility, which makes forecasting challenging, to say the least."
Chairman van der Heyden said the level of the New Zealand dollar, which had been trading around 70 cents US, remained a concern but this has been fully factored in to the revised 2009/10 forecast.
Fonterra is announcing its financial results for 2008/09 and confirm its payout for the 2008/09 season tomorrow.
