The average Southland dairy farmer will receive about $110,000 in extra revenue after milk giant Fonterra yesterday announced an increase in its forecast milk price for the season.
In total, Southland dairy farmers can expect a $100 million increase in income by October next year.
Fonterra lifted its milk-price forecast for the season to $7.50 a kilogram of milksolids – a 50-cent increase on its $7 forecast in May.
DairyNZ senior economist Matthew Newman said the forecast meant an increase of about $100m in farm revenue, before tax, for Southland dairy farmers.
The average Southland dairy farmer would receive about $110,000 in extra revenue, he said.
Farmers were likely to spend more than half of the additional income on farm working expenses, such as supplementary feed, fertiliser, and repairs and maintenance.
Some would also repay some debt by reducing their mortgages, he said.
Half the money would be received before May next year as monthly payments, while the rest was expected to be paid between July and October 2014 as final payments, Mr Newman said.
Fonterra chairman John Wilson said the higher milk-price forecast reflected strong international dairy prices and a weakened New Zealand dollar.
Fonterra also lifted the advance rate payments made to farmers through the season for their milk, from $5 a kilogram of milk solids to $5.50 a kilogram of milk solids.
«A higher advance rate provides our farmer-shareholders a strong start to the season and the opportunity to grow their own farming businesses,» Mr Wilson said.
The board has also amended the dividend policy to help deliver a sustainable dividend from the 2014 financial year onwards.
When setting the dividend, directors would take into account short and medium-term earnings to deliver a dividend per share of 65 to 75 per cent of adjusted net profit after tax.
DairyNZ chief executive Tim Mackle said farmers needed to remember it was just a forecast and it could change quickly.
«We started off with a hiss and roar last season in terms of milk production, and ended up with the worst drought in 70 years. It highlights the need to keep planning and monitoring to make the best decisions,» he said.
Southland Federated Farmers dairy chairman Allan Baird said it was good news, but it was still early in the season.
The back end of the season would determine if the forecast was accurate, he said.