Fonterra's dairy payout down to $4.55

Photo / Amos Chapple

Low international dairy prices and the exchange rate have pushed Fonterra to forecast a reduced payout next season of $4.55 per kilo of milksolids.

This season it is due to pay out $5.20 a kg. Fonterra farmers received a record $7.90 in the 2008 season, averaging over $800,000 per farmer. The 10-year average before that season was $4.60 a kg.

Fonterra is the world's biggest dairy exporter and accounted for 25 per cent of our national exports in the year to May 2008.

Co-operative chairman, Henry van der Heyden, said a volatile currency and continued uncertainty in international dairy markets made forecasting "extremely difficult and a constant challenge in the current environment."

"We were looking at a forecast over $5 when the Kiwi was at 50 cents but the rebound means we're now working with a dollar that's 10 cents higher. And, just this week - at a time when we've been seeing some tentative signs of recovery in the global dairy market - the US Government has announced export subsidies for their farmers, which is bad news for our farmers," he said.

Van der Heyden said with farmers' cash flows extremely tight, and a somewhat improved balance sheet, the board had also decided to bring forward to August this year a payment of 20 cents per kg of the "Value Return" for the current season.

The payment which totals about $250 million was previously deferred to be paid with this season's final payment in October.

The opening forecast payout for the 2009/10 season - beginning June 1 - of $4.55 comprises a milk price of $4.10 and value return of 45 cents per kg.

This compares with a forecast milk price of $4.75 and a value return of 45 cents in the current 2008/09 season.

van der Heyden said the Fonterra board had also reviewed the forecast for the current 2008/09 season.

"We remain on track to achieve the $5.20 per kilo of milksolids," he said. "And, we have said to our farmers that anything above $5.20 is likely to be retained."


- NZ HERALD STAFF/NZPA