Dairy farmers on track for 'record payout' as forecast farmgate milk price tops $9

Fonterra truck
Fonterra's forecast was for between $8.40 and $9 per kgMS. Photo credit: RNZ / Rebekah Parsons-King

Dairy farmers are on track to receive a record payout, as the forecast farmgate milk price for the current season tops $9 per kilogram of milk solids (kgMs).

ASB Bank's forecast payout of $9.10 was more than Fonterra's forecast of between $8.40 and $9 per kgMS, which compared with 2013's record payout of $8.40.

ASB's forecast would boost revenue to about $13.6 billion for Fonterra's farmers.

The bank's revised forecast followed a 4.6 percent increase in this week's Global Dairy Trade Price Index, with a more than 5 percent increase in the price of whole milk powder, skim milk powders and butter.

The main reason for the increase is a drop in global supply, while New Zealand's total milk intake was down 2.6 percent in the six months to November, versus the year earlier.

"We've generally been on the optimistic end of the spectrum over the last little while and that remains the case," ASB chief economist Nick Tuffley said.

"We're on track for, at least in nominal terms, a record payout for farmers."

A farmgate milk price of $9.10 would contribute roughly $13.2 billion to the economy.