Dairy farmers are on track for one of their biggest paydays with Fonterra yesterday lifting the forecast milk price for the current season by 30c a kg of milksolids to $6.90 a kg/ms.
When the distributable profit, or dividend, is added, a fully shared-up farmer is forecast to receive between $7.30 and $7.40 a kg/ms this season before retentions.
Gross income would be between $7.15 kg/ms and $7.25 kg/ms.
The last time the payout had a seven in front of it was 2008 when it was $7.90 kg/ms, consisting of a milk price of $7.59 kg/ms and a distributable profit of 31c kg/ms, although Fonterra retained 24c kg/ms.
The extra 30c a kg forecast for this season is expected to pump an extra $400 million in to the economy, but in parts of the North Island, which are battling drought, the higher price will partially offset lower milk production and higher imported feed costs.
Fonterra chairman Sir Henry van der Heyden said the decision to raise the forecast was based on a prediction that current high international prices were expected to stay "further into the 2010-11 season".
Global markets were finely balanced, with solid demand underpinned by some growth in milk production in the northern hemisphere.
Chief executive Andrew Ferrier said a 1.5% lift in the company's last internet-based globalDairyTrade event added confidence to its forecast.
Dry weather in northern parts of the North Island was reducing milk flows, but the company was still to determine to what extent.
Mr Ferrier said Fonterra had maintained its forecast distributable profit, the total profit from the company's business which is distributed to shareholders, at between $550 million and $690 million, but expects the actual profit to be at the lower end of that range due to the rising milk price and impact of the currency.
The commodities and ingredients business was the hardest hit by the higher milk price and export-unfriendly exchange rate, but forecasts for its consumer business were in line with earlier expectations.
Sir Henry has also announced that the value of the fair value share would be retained at $4.52 per share, even though an independent valuation had estimated a restricted market value range with a mid point of $4.45 a share.
The lower valuation reflects the fact only farmers who supply milk to the co-operative can own shares.
