Farmers say it's good news that Fonterra has lifted its projected payout to at least $7.30/kg milksolids.It will be equivalent to nearly $900,000 for the average Fonterra supplier, if the company can match its 1.286 billion kg milksolids production last y
Farmers say it's good news that Fonterra has lifted its projected payout to at least $7.30/kg milksolids.
It will be equivalent to nearly $900,000 for the average Fonterra supplier, if the company can match its 1.286 billion kg milksolids production last year.
But Federated Farmers noted that production from key dairy farming areas is likely to be down sharply due to the spring drought, though the company managed last season's record milkflow despite drought in the North Island cutting production by 4 percent: South Island production rose 10 percent.
Federated Farmers' dairy section chairman, Lachlan McKenzie, said last night that he expected this season's production to be hit by drought in the upper North Island.
The North Island was home to 77 percent of the nation's dairy herds, and Mr McKenzie said that the good news about the payout -- a 30c/kg lift in the forecast milk price for the 2011 season to $6.90, in addition to a distributable profit of 40-50c per share with 25c-35c of that passed on to shareholders -- could be affected by the impact of drought on individual farmers.
"If your production is down, then you're going to make less this season than last," he said.
Fonterra chairman Sir Henry van der Heyden also noted farmers were potentially facing much higher input costs if dry weather continued, but said it was still early in the season, and some good falls of rain could help a lot.
"But milk production in the North Island is declining and we know farmers in some regions are struggling," Sir Henry said.
Mr McKenzie said some farmers were already having to dry-off milking cows, cutting their season short.
Even if there was substantial rain from today, the benefit wouldn't be seen in pasture growth for more than four weeks.
But the lift in the forecast milk price would give some farmers confidence to buy-in supplementary feed.
"We can only hope summer rain enables us to keep production going well into autumn," he said.
Fonterra's record payout was $7.90 paid in the 2008 season, when commodity prices spiked, with $7.66 of that going directly to the farmers.
