Fonterra boosts 2009/10 payout forecast by 55 cents to NZ$5.10/kg

Fonterra has lifted its payout forecast for the 2009/10 season by 55 cents to NZ$5.10 per kilogram of milk solids. The milk price component of the payout forecast was increased by 60 cents, although this was partly offset a a 5 cent decrease in the value return component. "(T)he revised forecast reflects a sustained improvement in commodity returns and a more positive outlook in international dairy markets," Fonterra Chairman Henry van der Heyden said. "(F)armers 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," van der Heyden said. "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," he said. Fonterra CEO Andrew Ferrier said the strong increases in prices for whole milk powder (WMP) at the globalDairyTrade events in the past two months echoed 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," Ferrier said. "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," he said. Ferrier said the 60 cent increase in the Milk Price from July's forecast reflected higher whole milk powder prices which are included in the commodity milk powder streams within the Milk Price. "The 5 cent fall in the forecast Distributable Profit is due to prices of cheese and casein product streams lagging the range of commodity milk powders [on which Fonterra's Milk Price is based]. Higher or lower returns on cheese, casein and other streams versus the commodity milk powder streams, go to profit rather than into the Milk Price," he said. "(T)he earnings and outlook for Fonterra's international businesses and joint ventures, including its Australia-New Zealand consumer business, which contribute to the Distributable Profit (Value Return) component of Payout, remain unchanged from the July forecast," he said. Van der Heyden said the level of the New Zealand Dollar, which has been trading around 70 cents US, remained a concern but this had been fully factored in to the revised 2009/10 forecast. Fonterra will announce its financial results for 2008/09 and confirm its payout for the 2008/09 season tomorrow, September 23.