KEY POINTS:
Fonterra is forecasting a record payout this year but farmers should guard against speculation that the final figure could be even higher, says chairman Henry van der Heyden.
Last season's payout to farmers of $4.46 per kilogram of milk solids has been eclipsed by a record forecast of $6.40 for this year.
"There's been a lot of speculation in the media about what we could or what we might pay for the full season," van der Heyden said at yesterday's annual meeting in Hamilton.
Westpac has said the final payout could top $7 depending on the exchange rate during the rest of the season.
"My advice is, don't get carried away by speculation," he said. "Prices are holding, prices are good but the currency is still shifting."
The majority of the company's earnings are made in US dollars, with the record $6.40 payout based on an average conversion rate of 71 USc.
"I noted this morning the currency was jumping around between 74 and 75 cents," van der Heyden said.
Fonterra had changed its forecasting policy because of volatility in markets and would only inform farmers of a change to the payout of at least 30c per kilogram of milk solids.
Rising commodity prices had been factored into the forecast.
"World cheese and butter prices have increased more than 50 per cent over the last couple of months and milk powder prices are still holding at levels more than double their long-term average," van der Heyden said.
Speculation has also been growing about a review of Fonterra's capital structure but van der Heyden was not revealing any new details yesterday.
The company was planning a multimedia link-up in November connecting meetings at potentially seven sites nationwide, giving all shareholders the chance to take part in a presentation on the options that had been considered by the board and the preferred choice.
"The capital structure discussion / consultation / debate will I believe be one of the biggest decisions that farmers of this industry will actually make," van der Heyden said.
"So I just can't reiterate it enough to encourage everyone to participate, listen to the debate because I am absolutely certain that we'll be able to come to a position that will actually lead to the future of this company for this generation and the next."
Van der Heyden said it was too early to set a timeframe for a final vote by shareholders.
"We have to take everyone with us," he said. "If you say three months, if you can't get them there in three months then you don't go."
The company's fair value share was $6.79 for the current season - up on last year but 20c below the independent valuer's midpoint.
"There was good reason for this," van der Heyden said. "We felt the sharp rise in commodity prices during the final months of the season would reduce margins in our value-added businesses and we believe it was important to take this into account."