Fonterra has revised its forecast payout for the current 2007-08 season to $6.40/kg of milk solids due to continued strength in commodity prices. The forecast is almost $2/kg above last season and 87c above its opening forecast.

World cheese and butter prices have increased more than 50 percent over the past few months and milkpowder prices are holding at levels that are more than double historical long term prices.

Fonterra chief executive Andrew Ferrier says it has to be careful to recognise customer sensitivity to these very high prices, but their response is not yet known. He says some degree of price fluctuation could be seen for a while.

Farmers will receive an advance payout of $4.20/kg in October, which is a rise of 60c/kg.

Prices for dairy goods have continued to grow strongly since Fonterra's previous forecast issued on 23 May for this season of $5.53/kg of milk solids. The past season's payout ended at $4.46/kg.

Source: National Business Review