Hopes high farmers will get a raise

Directors of dairy giant Fonterra directors will tomorrow sign off on the all-important final milk payout for last season - and it seems likely farmers will get the pay rise they want.

A well-placed Fonterra source said it had been "a good year" for New Zealand's biggest company, a farmer co-operative. This means directors could increase the $4.50/kg of milksolids payout guidance they have so far given farmers for the 2004-2005 dairy season.

An increase of 10c/kg to $4.60 would mean 2004-2005 season earnings of $414,000 for owners of average-sized herds. A 15c/kg increase would be $418,500 and a 20c/kg would mean earnings of $423,000.

The average Fonterra herd now produces about 90,000kg of milksolids a season. Fonterra controls 95 per cent of New Zealand's raw milk supply.

The country's payout leader, specialist export processor Tatua, will announce its final payout next week.

Tatua, based at Tatuanui in the Waikato, is a minnow compared with Fonterra: it has just 138 farmer-shareholders. However it has trumped all the competition for many years and last year paid $4.39 compared with against Fonterra's $4.25.

Kevin Wooding, the retired dairy wing chairman of Federated Farmers, believed Fonterra had "an extra 10c to 20c still in the system" to pay to its 12,000 or so suppliers.

Wooding's successor, Frank Brenmuhl, said farmers were counting on a final payout lift to cover soaring fuel costs. The price of fuel was hitting their pockets on-farm and off-farm (through increased milk tanker costs).

They would also be looking for more than $4.50 because many experienced lower than budgeted milk production last season due to a wet cold spring, late summer and long, dry autumn.

However not all farmers are optimistic about an increase.

One big corporate farmer with herds in the North and South islands believed Fonterra would "struggle" even to make its $4.50/kg guidance because of the dollar's strength against the United States dollar during the season.

An increased payout to $4.60 would mean a pay increase of nearly $32,000 for the average Fonterra farmer. An increase to $4.70 would mean $40,000 more.

The 2005-2006 dairy season began last month, but Fonterra does not sign off its annual accounts and announce the final payout for the previous season until July.

The payout forecast for the 2005-2006 season is $3.85/kg, the same price that kicked off last season.

But Fonterra chairman Henry van der Heyden warned earlier a repeat of last season's four leaps in payout to $4.50 was unlikely because of foreign exchange pressure and the likelihood that international prices would start losing their gloss.