Fonterra, which raised $525 million through a unit trust for external investors last month, has hiked its forecast payment to farmers and expects to see more gains in global dairy prices next year.
The dairy co-operative increased its forecast farmgate milk price by 25 cents to $5.50 per kilogram of milksolids and held the expected net profit payment of 40 cents to 50 cents per share, the Auckland-based exporter says in a statement.
It also increase advance rate payments to farmers by 40 cents after the Shareholders' Fund float strengthened its balance sheet and reduced redemption risk.
"The immediate effect of this decision is that our farmers will have more money flowing into their bank accounts from late January when they are paid for the previous month, and that will help them with their cash-flows," outgoing chairman Henry van der Heyden says.
Units in the Fonterra Shareholders' Fund fell 1.1% to $6.55. They were sold at $5.50 and climbed as high as $6.95 in their first day of trading in a flurry of investor demand. Fonterra shares, which farmers can trade among themselves, were unchanged at $6.61.
Chief executive Theo Spierings says the outlook for the kiwi dollar is neutral and drought concerns in the US, Ukraine and Russia, and extreme wetness in Brazil and Argentina, has hit wheat and grain prices which feed into dairy.
"Given current global conditions, our forecasting anticipates global dairy prices are likely to move higher in the first half of 2013," he says.
Fonterra cut its forecast farmgate payout 25 cents to $5.25 and trimmed the expected dividend by 5 cents to a 40-50 cent range in August, citing the strength in the New Zealand dollar.
The kiwi rose to 83.32 US cents from 83.19 cents immediately before the announcement.
The Auckland-based company made a payout of $6.40 for a full shared-up farmer made up of a farmgate milk price of $6.08 per kilogram of milk solids and a dividend of 32 cents a share. That was below the forecast range to $6.45-$6.55 Fonterra gave in May.