5 October 2004
Fonterra Lifts Payout Forecast And Advance Rate
Fonterra Co-operative Group has announced a 20c lift in its forecast payout from $3.85 per kilogram of milk solids to
$4.05. It has also increased the advance payout rate for milk to $2.90 kg/MS.
Announcing the increase, Chairman Henry van der Heyden said good market demand was supporting sustained strong commodity
prices and had led to the Board making the revision.
"This revised forecast, early in the current season, will be welcomed by farmers who have had a tough start to the
season because of the wet cold spring. They will especially welcome a boost to their cash flows from the higher advanced
rate.
The higher advance rate will take effect on November 20.
Mr van der Heyden said Fonterra had started the season well and experienced good in-market demand.
"Prices are firm as the supply from major exporters, including Fonterra, is quickly being committed by customers looking
for security of supply. We are increasingly confident that the current pricing will hold into 2005 and this confidence
is reflected in the payout forecast increase. We remain conscious of the risk that demand could decline should prices
move too high. We are also mindful that the world economic outlook remains uncertain and instability can quickly
influence demand patterns."
Mr van der Heyden said the improved price forecasts were welcome and would help offset the currency impacts which
Fonterra has signalled would be worse in the 04/05 season. Fonterra will convert its earnings this season at an average
exchange rate of US60-62 cents compared to US52 cents last season.
He also reminded farmers that while high commodity prices reflected well in payout, they translated into increased costs
in Fonterra's value-add businesses.
"But our shareholders understand this dynamic and appreciate that the value-add businesses come into their own when
commodity prices are low, providing farmers with the best of both worlds. In the interim our consumer business New
Zealand Milk and the value-add businesses in Ingredients are doing everything possible to recover these higher costs."
Month Payout Forecast 2004-05 Advance rate March 04 $3.50 kg/MS $2.50 June 04 $3.85 kg/MS
$2.70 July - October 04 $2.80 Nov 04 - Feb 05 October 04 $4.05 kg/MS $2.90 Nov 04 - Feb 05
ENDS