The dairy co-operative yesterday reported an operating profit of $1.44 billion for the six months ended January 31, compared to $960 million in the previous corresponding period.
Revenue rose 21% to $9.4 billion.
Operating expenses rose only marginally to $1.03 billion from $1 billion.
Fonterra was also helped this year by paying only $7 million in tax compared with $36 million last year, but the $293 million reported profit was substantially ahead of the $7 million for the previous period.
An unchanged 8c-per-share interim dividend would be paid.
Mr Ferrier said the rising milk price was putting pressure on Fonterra's operating earnings, which were primarily driven by the ability to make and sell a range of dairy products at a margin above the cost of milk collected from farmers.
"The margin squeeze is particularly significant in our ingredients business, where the cost of raw milk represents a substantial proportion of total operating costs.
"Thanks to our strategy of building leading brand positions in our key categories, our consumer businesses are better placed to withstand price increases. But we are not immune," he said.
It was the first time Fonterra had publicly reported a half-year profit, and it could do so because it knew the milk price for the half year.
Chairman Sir Henry van der Heyden said strong international dairy markets meant the 2010-11 financial year was shaping up as one of Fonterra's best in terms of returns to its farmer shareholders.
He confirmed the current forecast payout range for the season of $7.90 to $8 per kilogram of milk solids, before retentions, and $7.75 to $7.80 - milk price plus dividend.
The forecast payout would be welcomed by farmers, many of whom had businesses that remained under pressure after several challenging years and a current season marked by some difficult weather, he said.
"It is also good news for the New Zealand economy in the post-earthquake environment, underlining the importance of dairying to New Zealand's economic wellbeing," he said.
The Otago Daily Times has previously reported that the forecast payout is estimated to inject about $900 million into the economy.
For a southern South Island farmer producing 140,000kg of milk solids, the higher payout is worth another $53,000 gross and will push gross income to more than $1 million.
Fonterra Shareholders Council chairman Simon Couper said farmers would appreciate the resilience and strength of the co-operative in gaining a good payout.
"It is good to see that the dividend is still on track given the increase in commodity prices.
It will be a continuing challenge to see this profitability through to the end of the year."
Farmers would be relieved the payout was confirmed as they struggled with rising fuel and wage costs, demands from banks to repay debt, and increases in all farm inputs, he said.
"It's fantastic that this profit stays in New Zealand for the benefit of all Kiwis," Mr Couper said.
Sir Henry said current dairy prices appeared to reflect a change in supply and demand for food internationally.
Fonterra was feeling the benefits of growing demand in China and other Asian markets and tighter international supply because of adverse weather in many parts of the world.
To date, those higher prices had more than offset the negative effects of a stronger New Zealand dollar against the US dollar, in which most international dairy sales were denominated, he said.
Looking ahead, Mr Ferrier said the tragic events of February and March in Christchurch and Japan would be reflected in the second half of the financial year.
Fonterra was now quantifying the impacts on its business, which would be primarily in the area of inventory losses.
Some of those losses would be covered by insurance, he said.
