Fonterra today (22 September) increased its forecast payout for the coming season by 12%, citing an improvement in commodity returns.
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The New Zealand dairy giant, raised its estimated payout to farmer shareholders to NZ5.10 (US$3.68) per kilogram of milk solids for the 2009/10 season, but said the kiwi dollar at its current levels around US$0.70 remained a “concern”.
Fonterra chairman Sir Henry van der Heyden said the revised forecast reflected a sustained improvement in commodity returns and a more positive outlook in international dairy markets.
He added that farmers will begin to benefit from the higher payout forecast from next month, with a lift in Fonterra’s advance rate schedule of payments to farmer-suppliers.
“We’ve had really tight cash flows on farms going into this season, and some serious belt tightening to get through. This will give our farmers a bit of relief and some extra flexibility to get the best out of their farms this year.”
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By GlobalDataFonterra CEO, Andrew Ferrier, said the strong increases in prices for whole milk powder at the global dairy trade events in the past two months echo a broad strengthening of demand and robust recovery in international dairy prices.
“What we’re seeing in the international market is the firming of a trend, with a more positive sentiment and stronger demand, producing better pricing across the board. Whole milk powder prices have been leading the way, with the prices for other dairy commodities now all moving in the right direction.
“While this is good news for our farmers in New Zealand, we remain in a period of extreme price volatility, which makes forecasting challenging, to say the least.”
Ferrier added that the earnings and outlook for Fonterra’s international businesses and joint ventures, including its Australia-New Zealand consumer business, remains unchanged from the July forecast.
Fonterra last week laid out plans to secure more funding from its farmer-members and shore up the company’s balance sheet.
The dairy exporter said its three-step plan should “take care” of its “capital needs” for the next five years – and, crucially, allow farmers to keep 100% ownership of the business.
