Dairy forecast adds $100m to North's economy

Northland Rural Support Trust co-ordinator, Julie Jonker, says a rise in dairy payout will be a 'shot in the arm' for the region's dairy farmers. Photo / File

A lift in the forecast dairy payout will bring up to $100 million more into the Northland economy - much to the delight of dairy farmers after a glum season when prices plunged to record lows.

Dairy giant Fonterra this week announced farmers would receive between $4.95 and $5 per kilogram of milk solids this season - up from between $3.85 and $4.60 forecast in September. A payout of $3.85 per kg of milk solids would have earned Northland dairy farmers $346 million while $5 will rake in around $450 million based on the roughly 90 million kg of milk solids produced in the region.

The latest milk price forecast is due to Fonterra increasing its forecast earnings per share range for the financial year to 44-55 cents. The company is also increasing the rate at which farmers are paid the co-operative support of 50 cents per kgMS, with the total amount paid up to December going from 18 cents to 25 cents.

Federated Farmers Northland dairy chairman Ashley Cullen said it would be a "slow uphill battle" for farmers to get the payout to realistic levels.

"The swings and roundabouts are still pretty volatile out there. Everybody is going to be able to keep going and I think prices are heading in the right direction."

He said the next international dairy auction coming up soon would be keenly followed.

"There's still a long way to go. Some farmers did do cost cuttings that could come back to bite them but they had to do it at that time to make their budgets work.

"A lot of farmers are sitting on the fence and at the end of this month or the start of December is when they'll sit down and assess their position."

Mr Cullen said the recent rain in light of a forecast dry summer would lift the mood of dairy farmers.

Northland Rural Support Trust co-ordinator, Julie Jonker, said any rise in dairy payout would definitely be a shot in the arm for farmers and the region as a whole, financially and psychologically.

"It's still not a great payout but it's a lot better than what it was. All their [dairy farmers] plans and effort hopefully is going to come to something," she said.

Mrs Jonker said it was good to see farming stakeholders taking to each other and working together despite going through difficult times lately.

New Zealand Chambers of Commerce Northland chief executive, Tony Collins, said the increased payout was welcomed news and would hopefully retain a sense of confidence in the wider business community.

"The latest forecast also shows that Fonterra has identified issues around market and their structure and taken action which is pleasing."

Fonterra chairman John Wilson said that the company's performance between August 1 and October 31 was built on the strong second half of the 2015 financial year.

"While it is tough on farm due to low global milk prices, farmers will welcome the ongoing improvement in Fonterra's performance delivering increased returns," he said.