The economy will receive a $900 million injection from soaring global dairy prices, Fonterra having yesterday announced a record forecast payout range of $7.90 to $8 a kilogram of milk solids for this season before company retentions.
The latest forecast is a milk price of $7.50 a kilo of milk solids, 60c a kilo higher, and a distributable profit range of 40c a kilo to 50c a kilo, before retentions.
For a southern South Island farmer producing 140,000kg of milk solids, the higher payout is worth another $53,000 gross in income and will push gross income to over $1 million.
Fonterra chairman Henry van der Heyden said strengthening international dairy prices in recent months had allowed the dairy co-operative to lift its fore
cast, which was now 90c a kilo higher than its opening forecast for the season and a massive $1.40 a kilo higher than the 2009-10 payout.
Between December 1 and February 15, prices paid on its globalDairyTrade internet auction rose 23.7% because of the world's insatiable appetite for dairy products.
Fonterra was now entering the latter stages of the season, and Sir Henry said a high portion of this season's production had already been sold and the market was only having a partial influence on the milk price.
''This significant milk price increase is welcome news indeed for Fonterra farmers, many of whose farm businesses remain under pressure after several challenging years and a current season marked by some difficult weather conditions,'' Sir Henry said.
''It's also good news for the New Zealand economy and underlines the importance of dairying to New Zealand's ongoing prosperity.''
In an interview, Sir Henry said while there was a risk soaring prices could burn off demand, such was the strength of global demand, that was unlikely in the short term.
Demand was being driven by developing nations such as China, India and Indonesia, which coincided with disrupted supply because of extreme weather such as floods in Australia and a harsh winter in the northern hemisphere.
Chief executive Andrew Ferrier said global milk supplies were growing at a slower rate than previously, 1.8% for the 2010 calendar year, well short of earlier estimates of 2%.
New Zealand has also been hit by less-than-ideal weather, curbing growth of milk production which is now expected to be similar to last year at 1.286 billion kilograms of milk solids.
Fonterra has maintained its distributable profit range at $550 million to $690 million, despite an expected reduction in operating earnings because of the high milk price.
