Record price forecast comes with a caution

Federated Farmers Otago dairy chairman Stephen Crawford says Fonterra's record forecast farmgate milk price is ''very good news'' but cautions it is ''not in the bank yet''.

On Tuesday, the dairy giant lifted its forecast by a further 50c to $8.30kg ms. That increase, along with an estimated dividend of 32c a share, amounted to a forecast cash payout of $8.62.

Mr Crawford described it as a very solid forecast, which equated to about 71c per litre of milk, but pointed out there was still 10 months of the production season ahead.

While not trying to put a dampener on it, it was still a forecast and there were ''any number of things that could derail it'', he said.

The main priority for Fonterra suppliers should be reducing debt, doing environmental work and working on security of on-farm resilience, he said.

Yesterday, Fonterra confirmed a $6.16 payout for the 2013 year. Overall, that was a good result, although for a lot of farmers ''there's not that much in it for them'', Mr Crawford said.

Fonterra Shareholders' Council chairman Ian Brown said the 2013 payout was an ''accurate reflection of the season''.

Given the pressure placed on Fonterra by drought and the unpredictability experienced in international markets, the co-operative had delivered a satisfactory return for farmers, Mr Brown said.

The success of the integrated Australia-New Zealand business, which had encountered tough market conditions of late, was vital for Fonterra. It had been working hard to adapt to the changing Australian business environment. Changes had been made to that business, but there was a cost associated with those changes and the council would continue to monitor the situation, he said.

He was satisfied with the final dividend of 32c and said the co-operative had displayed a ''welcome degree of pragmatism'' in its decision on retentions, given the cash flow issues being faced by some farmers.

Farmers would be happy to put the climatic challenges of last season behind them and were ''buoyed'' by the forecast payout for next season, he said.

Federated Farmers national dairy vice-chairman Andrew Hoggard said for many farmers, the 2012-13 payout would mean they would be able to make a small financial surplus, as both the milk price and the dividend were close to farm operating costs.

- sally.rae@odt.co.nz

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