Fonterra has announced a 55 cent increase in its forecast payout.
Last season Fonterra’s forecast payout was revised downwards twice. When this season’s forecast was set at $4.55 we hoped the company was being cautious so that any change would be upwards. That’s the case with today’s announcement of a new forecast payout of $5.10.
Fonterra Chairman, Sir Henry van der Heyden, says the revised forecast reflects a sustained improvement in commodity returns and a more positive outlook in international dairy markets. Sir Henry says 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.”
CEO, Andrew Ferrier, said demand had strengthened and there wwas a 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.”
In other words, it’s still too early for champagne, but another celebratory milkshake might be in order.
The company announces its 2008/09 financial results and confirms last season’s payout tomorrow.