26 May 2010

Average dairy farm revenues tipped to be $920,000

4:23 pm on 26 May 2010

Average dairy farm revenues could push $1 million next season after Fonterra raised expectations of a record payout.

A payout of $8 per kg of milk solids is on the cards if the New Zealand dollar and prices on world markets remain stable over the next year.

Fonterra is predicting a payout of $6.60 per kg of milk solids and a distributable profit of 30 cents to 50c per share for the 2010/11 season starting in June.

That is an increase of 50c on the current season's milk price, which will be confirmed later in the year.

Prices have fluctuated wildly in the past two years. But Rabobank analyst Hayley Moynihan says customer demand is improving and rivals are struggling to increase their milk production.

An $8 payout would boost the average farm's revenue to $920,000 before expenses, from a forecast of $760,000 this season.

But farm finance adviser Don Fraser says many farms are still struggling with high debt.

Fonterra generates more than 7% of New Zealand's Gross Domestic Product and has annual sales of about $16 billion.