A dairy herd wearing electronic collars, which guide the cows around the farm, lines up for milking Photo: RNZ/Sally Round
Fonterra's farmer shareholders will get an improved dividend this year, but they're being advised to spend the extra money carefully.
Northland MP and dairy farmer Grant McCallum said the near 25 percent increase will make a significant difference when the interim dividend is paid into farmers' bank accounts next month.
The dairy co-operative upped its full-year earnings guidance this week from 40-to-60 cents per share to 55-to-75 cents per share.
Grant McCallum Photo: SUPPLIED
For a farmer who owns 100,000 shares and supplies 100,000 kilograms of milk solids, the latest figure will result in an estimated $60,000 boost, based on a 60c dividend. That will be in addition to Farmgate milk earnings (the amount paid for milk, minus costs such as transport, capital investment and marketing).
And as milk prices remain elevated - with a $10.00 per kilogram of milk solids forecast midpoint - farmers are set for record profits.
"It's great news ... The dividend is going to add real value to those that are Fonterra shareholders," McCallum said.
"It might be another $60,000, which is not insignificant on top of a payout."
With global uncertainty swirling around potential tariffs, he urged farmers to spend their money wisely.
"It's very prudent to pay down some debt and invest in some key infrastructure."
That could mean investing in new milking equipment, machinery or fencing.
"Fencing off waterways, all those sorts of things, it gives us the opportunity and the income to do it."
High returns for dairy farmers coincide with strong beef export prices and a weak New Zealand dollar, which traded at US57c on Tuesday.
With some farmers earning an estimated 20 percent of their income by selling cull cows and rearing beef calves, the soaring United States market for beef was also playing a part.
Fonterra chief executive Miles Hurrell said he was "pleased to confirm" the earnings boost, which was a "great outcome for farmer shareholders."
Fonterra's Miles Hurrell Photo: RNZ / Dan Cook
There was a downside however as farmers throughout most western and central areas of the North Island are grappling with drought conditions.
Marotiri dairy farmer Richard Webber, who farms west of Taupō, said he had hoped to capitalise on the high milk price.
He said production on his farm had been constrained as the dry weather started to bite. He had been drying cows off and bringing in feed.
"Thankfully we have a reasonable milk price to keep the cashflow in check," Webber said.
"But it would have been nice to double down on that this year and have a good production year, but it's just not going to be the case,"
