Fonterra lifts dairy payout - $55K extra for its farmers

The average dairy farmer stands to make an extra $55,000 on the back of the increased pay-out from dairy giant Fonterra.

Federated Farmers dairy chairman Lachlan McKenzie said the extra $55,000 gross makes up for the $53,000 loss that the average dairy farmer had last year.

"People don't realise, they think the average farmer is getting a half-a-million dollar income but they have to pay all the wages and bills out of that," said McKenzie.

He said the loss last year hurt farmers but the increase pay-out from Fonterra will go some way to improving the balance sheet this year.

Fonterra announced today that it would lift its pay-out forecast to its farmers by 55 cents to $5.10 per kilo of milk solids.

Fonterra chairman, Henry van der Heyden, said the revised forecast for the 2009/2010 season reflected "a sustained improvement in commodity returns and a more positive outlook in international dairy markets."

He said farmers would begin to benefit from the higher pay-out forecast from next month, with a lift in the co-operative's "Advance Rate" payments to farmer-suppliers.

Federate Farmers president Don Nicolson said the announcement was great news.

"But just before you break out the champagne, [the pay-out] is still less than the one at the end of last season," Nicolson said.

He said farmers were finding it tough, coming off the end of the drought.

Nicolson said now all that was needed was a drop in the Kiwi dollar to help the whole primary sector out.

"Internally, the economists are saying that the economy is bubbling along OK but it could be so much better with a lower currency," Nicolson said.

The increased payout is made up of the milk price component increasing 60 cents to $4.60 and the value return portion falling 5 cents to 50 cents per kilo of milk solids.

"We've had really tight cash flows on farms going into this season, and some serious belt tightening to get through. This will give our farmers a bit of relief and some extra flexibility to get the best out of their farms this year."

Fonterra chief executive , Andrew Ferrier said the strong increases in prices for whole milk powder at the recent auctions showed "a broad strengthening of demand and robust recovery in international dairy prices."

"What we're seeing in the international market is the firming of a trend, with a more positive sentiment and stronger demand, producing better pricing across the board.

Whole milk powder prices have been leading the way, with the prices for other dairy commodities now all moving in the right direction."

The forecast payout increase was good news for its New Zealand farmers, but "we remain in a period of extreme price volatility, which makes forecasting challenging, to say the least."

Chairman van der Heyden said the level of the New Zealand dollar, which had been trading around 70 cents US, remained a concern but this has been fully factored in to the revised 2009/10 forecast.

Fonterra is announcing its financial results for 2008/09 and confirm its payout for the 2008/09 season tomorrow.

-NZ HERALD STAFF