Fonterra Raises Milk Payout Forecast for Second Time in a Month

August 27, 2013 05:52 AM

Current market views support commodity prices remaining at historically high levels longer than previously forecast, Fonterra chairman says.

Matthew Brockett

Fonterra Cooperative Group Ltd., the New Zealand dairy exporter embroiled in a contamination scare, raised its forecast payment to farmer suppliers for the second time in a month.

Farmers will receive NZ$7.80 ($6.10) a kilogram of milk solids in the year through May 31, 2014, Auckland-based Fonterra said today in a statement. That compares with a July 31 estimate of NZ$7.50 and last year’s distribution of NZ$5.80. Fonterra has also forecast a 2013-14 dividend of 32 cents a share, taking the new projected payout to NZ$8.12.

"Current market views support commodity prices remaining at historically high levels longer than previously forecast," Chairman John Wilson said in the statement.

Fonterra, the world’s biggest dairy exporter, said earlier this month that a whey protein shipped to China and used in the manufacture of baby formula may have been contaminated with a botulism-causing bacteria. The incident prompted product recalls across Asia and threatened New Zealand’s trade ties with China, its biggest dairy customer.

"Although there has been some fallout from the whey contamination scare, it has not been enough to have a noticeable impact on prices," Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland, said in an e-mailed note. "Trade disruption has also been minor to date."

Fonterra achieved record sales and revenue from two GlobalDairyTrade auctions this month, showing "continued confidence in our products and strong demand from many of our key markets," Chief Executive Officer Theo Spierings said on Aug. 23.

Rising farm incomes and higher returns from exports will add to growth in New Zealand’s NZ$211 billion economy. Payments to Fonterra’s 10,500 farmer suppliers may also be boosted by the New Zealand dollar’s 9 percent slide against the greenback since April 11.

The kiwi dollar rose slightly after Fonterra’s announcement. It bought 78.24 U.S. cents at 3:25 p.m. in Wellington.

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