Milksolid payout lift relieves farmers

Fonterra yesterday announced an increase of 75 cents in its payout forecast - to $4.60 a kilo from $3.85. FILE PHOTO

The increase in Fonterra payouts announced last week is "another finger in the dyke" for beleaguered dairy farmers, says Federated Farmers Wairarapa Dairy Chairman Chris Engel.

Fonterra yesterday announced an increase of 75 cents in its payout forecast - to $4.60 a kilo from $3.85.

Dairy NZ said 60c of the increase would occur in the 2015-16 season ending next May, and 15c had been added to the retrospective payments to be paid between June and October next year.

When the earlier forecast was announced in August, Mr Engel said it was something that was "going to hurt everyone".

The change upwards, he now says, can only be a good thing, although "it has to keep going up".

"It's another finger in the dyke ... it's in the right direction, but it's still a long way to go."

Dairy NZ estimated 70 per cent of farmers would still require extra cash to meet their core costs this season - down from 90 per cent when the milk price was $3.85 a kg of milksolids.

The break-even point for most is still estimated to be $5.30 a kg.

Payments for September and October are still $2 behind what they were last year, Mr Engel said.

"It's a win, but it shows you how far behind it still is."

A drop in interest rates is another piece of positive news for farmers, Mr Engel said - for now.

"That's helping, but how the Reserve Bank feels in October will be the thing."

Troublesome weather is also something farmers will be keeping an eye on, after a wet September which followed an extended period of little rain - and forecasts of a very dry summer ahead.

"Rain is a two-edged sword," Mr Engel said, citing "surface water problems".

"We've had the digger out every day."

Mr Engel said he was pleased to see the sun return for the weekend.

However, he said, "when it stops I'm too scared it will stop for five months."

Despite the recent rain however, groundwater had not been replenished as usual, which could have implications for irrigation in summer.

Some waterways that would normally be running at this time of year are still not, Mr Engel said.

"I can look at drains that should be pumping now, and they're just a trickle.

"That's the winter ... we haven't had that volume to saturate everything."

Meanwhile Mr Engel said he is not bothered by reports that Fonterra chief executive Theo Spierings has had a payrise of 18 per cent, taking him close to $5 million - even as the dairy giant lays off 750 staff.

"It's easy for us to find fault when it's raining and things are going bad," Mr Engel said.

"We're hoping that when they employ people, they choose the best and pay them accordingly."

Mr Engel said the wage bill for Fonterra seems "quite staggering" - with 22 staff earning more than $1 million and 1072 people earning between $100,000 and $110,000.

"But it's hard for us also to fathom the size of the business here in our little valley - nationally and globally. We trust that they're earning their money - otherwise they'll get rid of them, won't they?"

Additional reporting NZME