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Farmers Welcome Payout

30 May 2008

Farmers Welcome Payout

Federated Farmers has welcomed Fonterra's announcement of a record payout of $7.60 plus 30 cents retention per kilogram of milk solids for the 2007/08 year.

The vice-chairman of Federated Farmers Dairy section, Lachlan McKenzie says this is great news and that the season has been an exceptional one for dairy farmers. He says even with the drought, rising fertiliser and supplementary feed prices, farmers have had a good year. He says the payout will benefit the whole country in what is otherwise a challenging economic time.

He says that next year Fonterra is forecasting an opening price of $6.65, plus 35 cents added value to give $7 and that will also help boost confidence in the future. But he warns that the world price for milk is highly volatile.

"In the past the market has fluctuated by between five and 10 cents a kilogram. But this has changed and in the coming year, the price could fluctuate between 50 cents and a dollar. In other words, the payout could be good, but it may drop considerably. As farmers we have good times and these help us weather the bad ones," said Mr McKenzie.

Mr McKenzie says he is disappointed in the drop in the Fair Value Share (FVS) of $1.22 to $5.57. The FVS is the value of the shares held by farmers in Fonterra.

"I believe that the drop in the FVS is caused by high interest rates and this has eroded the equity of shareholders. It would seem that high interest rates are in turn caused by irresponsible government spending. The fiscal policy is stopping the country fully benefiting from the gains made in the market by the dairy industry," he said.


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