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Fonterra holds pay-out on improving outlook

Friday 20th August 2010

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Fonterra will hold its forecast payout to its farmer members in the range of $6.90 to $7.10 per kilogram of milksolids, along with an unchanged forecast milk price of $6.60 per kilo, chairman Henry van der Heyden announced this morning.

The news will come as a relief both to farmers and economic soothsayers, given the growing importance of the dairy cooperative’s performance to the performance of the domestic economy. 

Fonterra had previously signalled a possible cut to the payout rate, on August 4.

“While there is still uncertainty in global markets, if current commodity pricing and foreign exchange rates were at current levels for the rest of the season, then we estimate the 2010/11 payout would be maringally lower than our current forecast.

“However, we are holding the forecast payout of $6.90-$7.10 as we are seeing signs of potential strengthening of international prices further into the season,” Sir Henry said.

Chief executive Andrew Ferrier predicted Fonterra’s profit for the year would be in the upper end of the previously announced range of 30 cents to 50 cents per share.

Market conditions were finely balanced, said Ferrier. On one hand, the New Zealand dollar remained strong, while there was some evidence of slower global growth.

“On the other hand, extreme weather in Europe, Russia, Pakistan and parts of China has affected agricultural production, although the extent of the impact on dairy is unknown.”

The Russian grain export ban could also help underpin dairy prices, Ferrier said.

Fonterra announced no change in the 2010/11 advance rate schedule, with the opening advance staying at $4.30 per kilo of milksolids.

The cooperative’s annual results will be released on September 23.

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