Payout forecast due

Fonterra's first forecast for the 2013-14 dairy season, due tomorrow, is expected to add momentum to the New Zealand economy, Westpac economist Doug Steel says.

The season runs from June 1, 2013, to May 31, 2014. Mr Steel said he was told to expect the announcement tomorrow.

The new season's payout forecast should be well above the current estimate of $6.25 to $6.30 per kilogram of milk solids for the season just ending.

''We have long had $6.60 - milk plus profit - on the board as an initial pick for the new season. But the upside risks have grown considerably with world prices holding up a little better than expected and particularly with the decent dip in the New Zealand dollar over recent weeks.

''We would not be that surprised to see $7. That would be a positive signal of global dairy market confidence from Fonterra.''

Dairy products accounted for more than a quarter of New Zealand's merchandise exports.

A total milk plus profit payout forecast of $7, along with an assumed 6% lift in next season's milk production, was indicative of total dairy industry revenue being almost $2 billion higher than that of the previous season, Mr Steel said.

Such an outcome would be a cash injection to the economy in the order of 1% of GDP over the coming 18 months, a clear strong support to growth.

''Of course, whatever the first forecast is, it is just that. There will be plenty of scope for it to change from when it is made and when the final actual payments for the season are made in October 2014.''

 

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