New Zealand's economy received a half billion dollar boost with dairy giant Fonterra boosting its payout to farmers by 7% or 40c to $6.10 per kilogram of milk solids.In addition, Fonterra has signalled next year's milk price was likely to be the same. Las
New Zealand’s economy received a half billion dollar boost with dairy giant Fonterra boosting its payout to farmers by 7% or 40c to $6.10 per kilogram of milk solids.
In addition, Fonterra has signalled next year’s milk price was likely to be the same. Last year's payout was $5.20kgMS.
Based on last season’s production total, the extra 40c would mean a further $512 million in farmers’ pockets.
However, because of drought condition in parts of the country, production has dropped.
Fonterra’s board met today at its Auckland headquarters and also maintained its forecast range for its distributable profit of 40-50c per share.
The co-operative’s dividend range was also uncharged at 20-30c per share, which indicated 10-30c per share would be retained by the company.
Fonterra chairman Sir Henry van der Heyden said continued strength in global dairy prices, with demand growth beginning to outstrip supply, had driven the board’s decision to increase the forecast milk price.
The increase is the first since the forecast milk price was raised by $1.10 last November.
“This extra 40c will be welcome by our farmer shareholders and also confirms that 2009/10 is shaping up as the second best in terms of cash payments to Fonterra farmer shareholders,” Sir Henry said.
“However, it comes at a time when many farmers, especially those north of Taupo, are suffering from worsening drought conditions. Many of them are being forced to dry off their herds early this season, so unfortunately what they will gain in farm income through the higher milk price they may lose through lower production.”
Sir Henry said a more formal forecast will be provided at the end of May for next year, but it was Fonterra’s view that farmers should budget for a milk price around this year’s level.
Fonterra chief executive Andrew Ferrier said since the last forecast dairy prices had remained relatively high and more stable than expected for several months and had recently increased further.
“The global supply/demand balance for dairy products has shifted to a slight supply deficit,” he said.
Demand from the Middle East, North Africa and Asian markets continued to grow.
“On the supply side, global milk production has continued to slow, with production contracting in several key markets.”
