28 Feb 2014

Milk price won't lead to 'spending spree'

9:01 am on 28 February 2014

A dairy farming leader says Fonterra's latest milk payout lift is more excellent news for farmers, but car dealers and rural agents shouldn't start rubbing their hands just yet.

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Fonterra has lifted its forecast farmgate milk price for the season by another 35c a kilo of milk solids to a new record of $8.65.

The revised milk price and a 10c-a-share dividend on top of that puts farmers in line for a payout of $8.75 for the season ending in May. Their monthly advance payment has also been lifted by another 25c to $6.05 a kilo.

If it's confirmed at the end of the season, the milk price increase is calculated to boost dairy sector revenue by another $600 million.

But Federated Farmers dairy chair Willy Leferink says that doesn't mean farmers will go on a spending spree. He says a lot of people still want to reduce debt, the money is not yet in the bank and the increases are only coming towards the end of April, with the final payout not until October.

Mr Leferink says that in the next half-year the money will alleviate a lot of financial pressure, although some of it will be spent.

He says he expects other dairy companies to lift their payouts too, because they are selling milk powder into the same markets.