Fonterra has announced that the forecast total payout available to New Zealand dairy farmers in the 2015/16 season will be NZ$4.25 to NZ$4.35 (18.5c/litre at Irish milk solids and current conversion rates).

This price is made up of forecast farmgate milk price of NZ$3.85/kg of milk solids (17c/litre) and forecast earnings per share range of NZ$0.40 to NZ$0.50 per share (2.1c/litre).

In addition, Fonterra has announced it is making a payment of NZ$0.50 per shared-up kilogram of milk solid to provide co-operative support to its farmers this season. This payment will be in the form of an interest-free loan for two years that will be paid back when the farmgate milk price or advance rate goes above NZ$6.00/kg MS.

Revised 2015/16 farmgate milk price forecast

Announcing the arrangements, Fonterra chair John Wilson said the farmgate milk price forecast has been reduced from NZ$5.25/kg MS to NZ$3.85/kg MS due to the continued significant imbalance in the global dairy market between surplus supply in 2014 and current weak demand.

Wilson said: “This imbalance and the challenge of lower prices continuing for longer than anticipated is a global issue, and one with which dairy farmers globally are increasingly grappling. Current prices are unsustainably low and we are seeing them beginning to impact production levels globally. We have confidence that prices will recover over the course of the season. This is going to be a tough season, and we encourage [New Zealand farmers] to make decisions based on today’s forecast milk price. We will update as the season progresses.”