Fonterra announced today its first payout forecast for the 2009/10 dairy season was NZ$4.55 per kg of milk solids reports interest.co. This was made up of a milk price of NZ$4.10 and a value added component of 45 cents. Economists were expecting a payout forecast of over NZ$5.00/kg. This forecast was assuming an exchange rate of 59 US cents, Fonterra said. Fonterra also left its forecast for the current dairy season unchanged at NZ$5.20, including a 45 cent value return component made in the final payout at the end of October. "We were looking at a forecast over NZ$5 when the Kiwi was at 50 (US) cents but the rebound means we're now working with a dollar that's 10 cents higher," Fonterra Chairman Henry van der Heyden said about the 2009/10 forecast."And, just this week "“ at a time when we've been seeing some tentative signs of recovery in the global dairy market "“ the US Government has announced export subsidies for their farmers, which is bad news for our farmers," van der Hayden said.Fonterra also said it had set its fair value share price for 2009/10 at NZ$4.52. This was down NZ$1.05 from the NZ$5.57 price for 2008/2009, and 5 NZcents below the previous forecast in December. Van der Heyden said the fall in the share price was understandable given the external factors which have seen a dramatic drop in share values around the world. However, farmers holding excess shares have the option of selling them at this season's price, he said."This season farmers holding excess shares (above their current season's production) will be able to sell them at the current season's share price of NZ$5.57. Farmers will then have the opportunity to buy any additional Co-operative shares they need to cover their expected production in the new season at NZ$4.52 at the beginning of the 2009/10 season rather than the end," van der Heden said. "Our hedging policy is designed to take out the volatility and provide as much certainty for our farmers as possible. But as a rule of thumb a 1 cent movement in the exchange rate realised over a year has an impact of about +/- 10 cents per kgMS in the Milk Price, with everything else being equal," he said.
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