BUSINESSDESK: Landcorp, the country's biggest farming company, is poised to pay a fatter annual return to the government after operating earnings beat forecast by almost two-thirds on record milk production.

Landcorp will increase the full-year dividend to $20 million from the $15 million payment budgeted for after "strong production and livestock product prices" boosted operating earnings, the company says.

The improvement includes record milk production of 13.3 million kilograms of milk solids.

The state-owned enterprise's operating earnings were about $27 million in the year ended June 30, "greatly improved" from the $16.3 million forecast but down from $42.2 million a year earlier.

Landcorp will deliver total shareholder return of about $8.1 million, some $85.3 million below budget.

"This largely reflects static farmland values over the year and a decline in livestock values," it said.

That implies a turnaround in valuation after the state-owned farming company lifted the fair value of its livestock 73% to some $72 million in the first half of the year.

Landcorp courted controversy earlier this year when it entered into a deal with China's Shanghai Pengxin to manage the 16 central North Island farms formerly owned by the Crafar family.

The Chinese company's acquisition stoked xenophobic attacks on foreign investment in farmland, and chief executive Chris Kelly defended the commercial acumen of the deal when he fronted a parliamentary select committee in May.