New Zealand dairy group Fonterra said today [Tuesday] it cannot envisage paying local farmers more than NZ$5.30 (US$2.25) per kilogram of milk solids they supply during the current season that ends 31 May.

This will be disappointing news for farmers, who had been told they could expect NZ$5.40/kg as recently as halfway through February. "We have not been spared the effects of Sept. 11 and the slowing of the world economy," said John Roadley, Fonterra's chairman, in a prepared speech.

Nevertheless, the expected new price of NZ$5.30/kg still represents an all-time high, and this despite the fact that the average of spot commodity milk powder had fallen by over a quarter in the last six months.