Fonterra's unsurprising decision to maintain its $4.60 forecast milk price reflects a belief that international dairy prices will continue to improve in the first half of next year.
Along with a previously announced estimated earnings per share range of 45c-55c, that amounted to a total available for payout of $5.05-$5.15, equating to a total forecast cash payout of $4.95-$5.
The board and management based the forecast on the view that unsustainably low prices would continue to affect production levels globally, chairman John Wilson said.
Although supporting the consensus view in the market that an improvement would take place, the market remained volatile.
"While there are signs of a recovery, particularly in China, we still need the imbalance between supply and demand to correct,'' Mr Wilson said.
That imbalance was starting to reduce with year-to-date production in the United States up by only 1% and slowing and New Zealand volumes were expected to be down by at least 6% over the present season.
In the EU, where quotas were scrapped earlier in the year, farmers were continuing to push production, now up 1%.
ASB rural economist Nathan Penny said while there were risks this season's milk price would not reach $4.60, the bank was more confident that it would lift to $6.50 next season and average at that level or above "in the long run''.
Fonterra has also reviewed the Fonterra Co-operative Support loan and decided not to continue it for milk collected after December 31.
The board introduced the loan of 50c kg/ms to help farmers deal with the tough financial climate.
It was available on production from June 1 to December 31 and was interest-free until May 31 2017, with repayments triggered when the farmgate milk price exceeded $6 kg/ms.
The board's scheduled review had weighed up the improved farmgate milk price and higher earnings per share forecast since the loan was launched, when the milk price was $3.85, and the need for financial discipline from the co-operative, Mr Wilson said.
The board would continue to monitor conditions and assess the need to continue the support if market conditions changed later in the season.
Seventy-five percent of farmers took the loan option.
Meanwhile, agricultural economics professor Alan Renwick said the Irish dairy industry was keeping a close eye on New Zealand as it increased its own production.
Prof Renwick, who recently joined Lincoln University from University College Dublin, said high debt levels, Fonterra's challenges, and the move away from grass-fed production were capturing Irish attention.
High levels of debt in New Zealand were used as a warning to the post-quota Irish industry, he said.
"A strength in Ireland is the low indebtedness of Irish farms. There is concern that expansion will lead to increases in debt and the vulnerability of businesses.
"Ireland also has a much more fragmented processing sector than New Zealand and much had been made of the Fonterra model and that Ireland should try to emulate this.
"However, recognition of the challenges facing Fonterra, and the success due to innovation of some of the Irish co-operative businesses, have raised questions in the minds of those in the sector whether actually smaller, more flexible businesses, may not be so bad after all,'' he said.
At Synlait Milk's annual meeting earlier this week, the Mid Canterbury-based dairy processor said the focus for the present financial year was on developing nutritional and infant formula products.
The company's total sales volume was set to grow from FY 15's 97,800 metric tonnes to 122,500 metric tonnes in FY 16.
More than half of that growth would be the result of increased nutritional sales in consumer-packaged infant formula, managing director John Penno said.
