25 Sep 2013

Fonterra lifts forecast payout for a third time

12:00 am on 25 September 2013

Robust international demand for dairy products has prompted Fonterra to lifts its forecast payout once again.

The co-operative increased its forecast payout to farmers for the third time since May for the current season, lifting it to $8.62 per kg of milk solids.

Fonterra says robust demand for whole milk powder from Asia, particularly China, is resulting in high global dairy prices.

That's led the processor and exporter to raise the forecast milk price by 50 cents to $8.30 per kg of milk solids.

Including an estimated dividend of 32 cents a share, Fonterra's 10,500 farmers are expected to receive $8. 62 per kg, a record high if it stands.

Economists estimate the increase represents a $5 billion boost to the economy, or more than 2% of the national economy.

Fonterra will report its full year earnings result on Wednesday.

Industry group DairyNZ says the forecast lift is a shot in the arm for farmers who lost money following the drought and helps kick them off to a good start this season.

Chief executive Tim Mackle says the average North Island dairy farmer lost $100,000 last season.

Mr Mackle says there have been indications for a while that market demand is pretty strong but the forecast payout must be treated with caution, as there is always potential for volatility before the season is over.