End of season bonus for Fonterra suppliers expected

The Dom  reports that Fonterra suppliers might get an end of season bonus of at least an extra 30 cents a kilo when the board announces the final payout after a meeting on Thursday. 

Its current payout forecast for 2007-08 is $7.30. Fonterra has a policy of revising payout estimates, other than its regular updates, only for movements of at least 30 cents, so a payout of at least $7.60 for this season is expected.

That would be higher than the current estimates of Goldman Sachs JBWere – $7.40 – and Westpac’s $7.50.

“It would be a mild surprise if the current season’s payout was $7.60 or more,” Westpac agri-economist Doug Steel said.

 That would be about $60,000 more for a 600 cow herd but farmers may not see all of the extra money because the company is considering retaining some of this season’s payout in light of uncertainty in international  financial markets.

Next year’s payout is expected to reflect the slight easing in world dairy prices in the past six months. Goldman Sachs JBWere is picking $6.25 a kilogram of milk solids for 2008-09, and Westpac $6.50.

Fonterra gave the drought as its main reason for lifting its payout forecast last month. A subsequent lift for 2007-08 and a more optimistic view for 2008-09 may be due to the fact that most dairy commodities, except skim milk powder, have been holding their prices in the past couple of months.

Even if next season’s payout is lower than this season’s it will still make dairying and dairy support attractive to people considering a move from sheep and beef although the latest Rabobank/Nielson Rural Confidence Survey shows some improvement in expectations for lamb prices. Philippa Stevenson reports on the survey on Rural Network.

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