21 Nov 2008

Lower milk payout forecast expected from Fonterra

6:09 am on 21 November 2008

Fonterra is expected to announce a further reduction in its forecast milk payout on Friday, as dairy commodity prices continue to fall on the world market.

The co-operative is currently forecasting a payout of $6.60 per kg of milk solids this season, compared with $7.66/kg last season.

Westpac Bank agricultural economist Doug Steel is picking Fonterra may reduce the payout to $6.10.

He says a sharp drop in milk powder prices from last year is being followed by butter and cheese prices, and the lower New Zealand dollar won't be enough to offset the price plunge.

But, he says, anything over $6/kg is still a lot higher than the average payout farmers have had in the past seven years, since Fonterra came into existence.