Fonterra has lifted its forecast milk payout to a record high.
Photo: SUPPLIED
In its latest update, the country's largest company has raised the milk price by 35c, pushing the total payout to $8.75 per kilo of milk solids.
Fonterra's 10,500 farmers will get $8.65 a kilo, while the dividend to investors, which Fonterra cut by two-thirds to 10c a share in December, remains unchanged.
Fonterra chair John Wilson says the increase "is a reflection of global commodity prices, and particularly powder prices, continuing to stay very strong - and that is just purely driven by demand, with a supply gap still evident in the global dairy world."
Mr Wilson says the price is still 70c a kilo below what it would have been if Fonterra's board had followed the milk price manual, and the board is exercising its discretion in withholding that amount.
Payout increase will add $600m to economy
BNZ economist Doug Steel says latest increase alone will add about $600 million to farmers' potential spending power.
Once added to the previous, already strong, forecast payout, revenue generated by the current season's milk will be about $5.6 billion more than the previous season, he says.
Mr Steel says it's the equivalent of around 2.6 percent of gross domestic product and it will filter through the whole economy.
He says the increased payout wasn't unexpected.
Mr Steel says the positive influence of the strong payout and forecasts for it are being seen in indicators like tractor registration, farmer confidence and farm sales.
Fonterra says it will update its dividend payout when it finalises its half-year financial accounts in March.
