Fonterra's payout for the 2011/12 dairy season is reducing because of declining commodity prices and a stronger New Zealand dollar, the dairy giant announced today.

The revised payout forecast is $6.75 - $6.85 per kg of milk solids for a fully shared up farmer, 15 cents down on the previous forecast.

The revised forecast comprises a lower Fonterra Farmgate Milk Price of $6.35 per kg/ms down from $6.50.

'We've had price declines in the five out of the last six Global Dairy Trade (GDT) trading events,” says chairman Sir Henry van der Heyden.

Higher levels of global milk production, uncertainties in international markets and the continuing strength of the New Zealand dollar led to the Board decision to lower the Fonterra Farmgate Milk Price forecast.

Overall, the GDT-Trade Weighted Index is down 5.7 per cent since December 13, 2011 when the forecast of $6.50 per kg/ms was announced.

The trends are indicating for stronger global production continuing into 2012, says Fonterra chief executive Theo Spierings.

'While we have had a strong start to the season in New Zealand with record milk flows, we are also seeing higher milk production levels in the US and Europe.

'International milk powder demand, however, currently appears robust which should help offset the impact of the stronger milk supply growth.”
He says in the past few weeks, global markets seem to be reacting to the on-going economic difficulties in Greece, the potential for conflict in the Middle East and China's reduced growth forecast.

These events appear to be having a negative influence on most commodity prices.

'We think dairy commodity prices are likely to remain under some pressure through to mid-2012,” says Theo.

The season's Distributable Profit range forecast of NZD 570 – 720 million, equating to 40-50 cents per share remains unchanged.

Fonterra is required to consider its Farmgate Milk Price every quarter as a condition of the Dairy Industry Restructuring Act (DIRA).

Fonterra will announce its interim results and dividend on March 29.