KEY POINTS:
West Coast farmers who escaped the widespread drought have been told they can expect a bonanza milk payment, in line with the "white gold" payout which will make millionaires of some Fonterra farmers.
The payout for Westland Milk Products farmers will jump around 50 per cent on last year to between $6.90/kg and $7.10/kg of milksolids for the 2007-2008 season ending on May 31.
The company paid out $4.62/kg last season and predicted at the time that this year's payout would be in a range of $4.75 to $5/kg. Fonterra will pay out at least $7.30/kg, but the higher payment is partly because it is changing its balance date from May 31 to July 31, and its final payout for the 2007-2008 season will be based on the cooperative's performance to the end of July.
Westland's final payout will similarly be based on milk supplied up to May 31, and the cooperative's sales up to the end of July.
Westland chief executive Scott Eglington said prices in international markets had held at high levels for longer than expected, and the higher prices had offset some of the erosion of revenues which would have been caused by the rising exchange rate.
"The change has been due to increasing commodity prices offsetting increasing NZ dollar," he said.
Fonterra chairman Henry van der Heyden earlier this month said commodity prices had been effectively propped up by a drop in exports from New Zealand due to drought.
"As production has dropped in New Zealand, supply gaps have opened up and prices have risen," he said.
Mr Eglington said West Coast farmers were benefiting from such supply gaps because the region had escaped the drought.
"The market is driven by supply and demand," he said.
"The drought that has hit many other parts of the country has meant the supply side of the equation is perceived to be lower. "This may have an impact on prices but we have yet to see that," he said. Production on the Coast was 2 per cent ahead of last year. "It will mean that farmers will have the higher payout across the higher level of milksolids, unlike some of the farmers whose production has dropped due to drought."
But he said production and transport costs had been increasing dramatically, and that those increases were a concern - especially when commodity prices begin to fall.
- NZPA
