New Zealand dairy group Fonterra today (14 December) confirmed the forecast payout for 2005/6 of NZ$4 per kilogram of milksolids.

This forecast was raised in September from May’s prediction of $3.85 per kilogram. The increase is the result of cost reduction and efficiency gains rather than external market factors, Fonterra chairman Henry van der Heyden stated.

“The stable forecast should come as no surprise,” he said. “Underlying market conditions remain stable with commodity prices holding at the upper end of their range. Supply and demand remain balanced on world markets. Mixed weather since August has meant that we’re on track for an average production year in New Zealand. Meanwhile the US dollar continues to be weak, lowering our returns in NZ dollar terms.”

The Fonterra board, after consideration of a range estimated by Duff & Phelps, an independent assessor appointed by the shareholders’ council, has set the Fair Value Share price for 2006/7 at an estimated $5.86. This represents an increase in value of 42 cents.

Van der Heyden said that these increases boded well for Fonterra in the short and long-term. “While payout is a snapshot of performance for one season, the Fair Value Share price takes into account Fonterra’s long-term prospects.”