The outlook for payments to Fonterra’s farmers is to be something of a balancing act, with global production expected to increase in an environment of waning economic growth. Against this, the NZ dollar’s decline will soften the impact. NZ’s commodity export price index had the biggest decline in seven years in August and milk powder has been one of the biggest to drop. Westpac’s economists cut their 2009/10 milk fat payment forecast to $6 from $6.30, a steep drop from the $7.10 prediction for the immediate season. Looking further out, milk payments could bottom out at around $5.70kg in 2011 and 2012. Tracking milk powder prices via Fonterra’s internet-based sales platform, globalDairyTrade, shows average prices fell 14% this month to $US3,306 a metric tonne.

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