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NZX Agrifax suggests a slightly higher payout, at $5.10 per kgMS for milk solids, than the $4.55 per kgMS made by Fonterra for the coming season.
NZX Agrifax Head of Dairy Businesses Susan Kilsby said, "Our payout prediction for the 2009/10 season is based on our view that there will be a slight improvement in dairy commodity prices over the next 12 months. Milk production is slowing in the leading dairy exporting countries, with the exception of New Zealand, which is positive for the longer term outlook for dairy commodity prices.
"However, stocks of product have built up in key exporting regions and are expected to take some time to clear. This, combined with export subsidies operating in the EU and now also in the US, will distort market pricing signals and create uncertainties in the market," Ms Kilsby said.
NZX Agrifax says that the biggest unknown for the season ahead is the NZD:USD exchange rate level. Over the past 12 months the New Zealand dollar has shown high rates of volatility, making forecasting the average exchange rate extremely difficult.
"Fonterra appear to have taken a conservative approach to their next season's forecast payout, which is prudent in today's economic climate. Last season they were a lot more bullish in their opening payout forecast for the current season and farmers were counting on this level of payout when they planned their seasonal expenditure requirements. The reduction in the forecast payout over the past year has put severe pressure on many dairy farmers' cash flows," Ms Kilsby said.
Fonterra also reconfirmed their forecast for the 2008/09 season at $5.20 per kgMS. "If this level of payout is actually achieved, this will be a strong performance in what has been a challenging season," said Ms Kilsby.
More detailed analysis of the latest developments in New Zealand's dairy industry can be found in the "NZX Agrifax Dairy Report", the May edition of which will be released later today. Details on how to subscribe to this report can be found on www.nzxagrifax.co.nz.
