International dairy prices have plummeted in recent weeks because of the credit crunch, and that market uncertainty prompted Fonterra to promise suppliers it would advise them of any shift of 30c or more in the payout per kilo of milk solids during the season.
It is understood selected Fonterra staff were advised earlier this week that a new forecast would be broadcast to shareholders on a Sky Television channel at noon on Friday.
Fonterra was contacted yesterday and confirmed it had sent notices to suppliers that it would broadcast a payout announcement on Friday, but declined to elaborate.
The initial forecast for this season was $6.60 a kilogram of milk solids (kg/ms), down from $7.90kg/ms last season, and it is believed the new forecast will be $6.30kg/ms.
Some in the industry believe it could go lower before the season ends in autumn, such is the market weakness.
Fonterra's 10,700 suppliers produced on average 111,000kg of milk solids last season.
If the payout was reduced by 30c a kilo, that would equate to more than $100 million less in income for suppliers.
Even at $6.30kg/ms, the payout would still be above average.
For the past five seasons it has averaged $5.06kg/ms.
The price of milk powder, Fonterra's main product, peaked last year at $US5000 ($NZ9085) a tonne, but an international Internet auction of powder held by the dairy co-operative earlier this month saw prices half that, ranging from $US2400 to $US2700 a tonne.
It is understood Fonterra has hedged a large chunk of the foreign currency it needs at between US69c and US70c, but the actual exchange has collapsed to below US60c, meaning it would not fully benefit from the lower exchange rate as other exporters were.
Fonterra accounts for 96% of all dairy products exported, and emerging dairy companies base the price the pay their suppliers for milk on the Fonterra price.
Commodity prices are coming under pressure as consumers put away their wallets or resist record high prices, bringing to an end to a golden run for the country's largest export sector.
A lower payout would have a huge impact on the economy, which has been underpinned by the export dollars the sector has earned and the investment farmers have made in converting properties.
Last season, Fonterra, the world's fifth-largest dairy company, earned 25% of New Zealand's export earnings and recorded total revenue of $19 billion.
Wool and grain prices have been falling around the world and now dairy looks like following.
In the 2007-08 season, whole milk powder averaged US$4600 a tonne, skim milk powder US$4325 a tonne, butter US$3755 a tonne and cheese US$4894.
A year earlier, whole milk powder averaged US$2687, skim milk powder US$2748, butter US$1848 and cheese US$2806.
Meat has so far avoided the fallout, but meat exporters appear less bullish, market reports being more conservative and noting caution.
