New Zealand dairy giant Fonterra has raised its forecast payout to its farmer owners by 20 cents to NZ$4.50 (US$3.21) per kilogramme of milk solids for 2004/2005.

Chairman Henry van der Heyden said the increase reflects continued strong market demand supporting record high commodity prices.

“We’ve now contracted with our customers a much higher proportion of our sales for this season, compared to when we last revised forecast payout in December,” he said. “We’re more confident now about our full-season earnings – hence this revision.”

He expected a lower payout next year. “We’ve been cautioning shareholders for some time to expect a lower payout for next season,” he said. “Commodity prices are at record levels, but they can’t remain there indefinitely. Also, despite our foreign exchange hedging policy, our hedged conversion rate against the US dollar will be lower, which will hit our NZ-dollar earnings harder than this season.”

The higher advance rate will take effect from March 2005.

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