12 Mar 2012

Fonterra trims forecast milk payout to farmers

7:36 pm on 12 March 2012

Fonterra has reduced its forecast payout to farmers due to falling international dairy prices and a high New Zealand dollar.

The dairy cooperative has trimmed the price it pays farmers for their milk by 15 cents to $6.35 per kilo of milk solids.

Its forecast dividend payout for the season remains unchanged at 40 cents to 50 cents a share.

Fonterra had lifted its milk price to $6.50 in December last year.

Chairman Sir Henry van der Heyden says commodity prices have fallen in five of the past six global dairy trade auctions.

The dollar's continuing strength and higher levels of milk production worldwide have also contributed to the decision to lower the milk price, he says.

Fonterra chief executive Theo Spierings says international demand for milk powder remains strong, but the cooperative thinks dairy commodity prices will remain under some pressure until the middle of the year.

The New Zealand dollar on Monday evening was buying just under US82 cents, at 81.83c.

Payout still good - Federated Farmers

Farmers say they are not too surprised by the drop in Fonterra forecast payout.

Federated Farmers says the trimming back of the forecast by 15 cents means the average dairy farmer would lose about $15,000 a year.

But dairy chairperson Willy Leferink believes it is still a good payout and farmers will have budgeted for the drop.

Mr Leferink says the new figure is more in line with the reality of the market and he does not expect it to fall further before the final payout announcement in September this year.

BNZ economist Doug Steel says high dairy prices in previous years prompted some countries to ramp up production, which is just starting to come on line.

Mr Steel says Fonterra's prices were not expected to fall until next season.