December 10, 2012 / 1:32 AM / 5 years ago

UPDATE 1-NZ's Fonterra ups payout f'cast, sees dairy price rise

(Adds economist comment, details)

WELLINGTON, Dec 10 (Reuters) - New Zealand's Fonterra, the world's largest dairy exporter, bumped up its forecast payout to farmer shareholders on Monday on the back of rising global dairy prices, and said it expected higher prices next year.

Fonterra said the higher forecast followed a recovery in international dairy prices since May, supported by expectations for growing demand in emerging countries such as China, and a likely drop in global supply because of a U.S. drought.

"Given current global conditions, our forecasting anticipates global dairy prices are likely to move higher in the first half of 2013," Fonterra Chairman Henry van der Heyden said in a statement.

The co-operative, which is the country's biggest company and exporter, raised its forecast payout for the 2012/13 season by about 4 percent to NZ$5.90 to NZ$6.00 ($4.90 to $5.00), up 25 cents on the previous forecast range.

The payout was revised up from NZ$5.65 to NZ$5.75 in August, when Fonterra said a stubbornly strong New Zealand dollar was taking the shine off recovering dairy prices. On Monday, it said its outlook for the currency was "neutral".

"The announcement suggests that Fonterra has confidence that prices will stick and may go up further in the first half of 2013, enough to lift the milk price payout to farmers," said Doug Steele, an economist at the Bank of New Zealand.

Fonterra, owned by around 10,500 dairy farmers, controls about a third of the world's dairy exports, and accounts for around 7 percent of New Zealand GDP and a quarter of exports.

It recently launched a shareholders' fund as part of a wider scheme to boost its capital structure and free up cash for expansion. The fund gives outside investors access to its dividends, but ownership remains with dairy farmers.

Fonterra's benchmark Global Dairy Trade-Trade Weighted Index has climbed roughly 25 percent from a near three-year low hit in May.

The upwardly revised forecast is made up a payout of NZ$5.50 per kilogram of milksolids, up from NZ$5.25 previously, and a further 40-50 cent dividend from Fonterra's consumer business. The figure is still below last year's NZ$6.40 payout.

The upward revision would add around NZ$400 million to New Zealand's NZ$210 billion economy, BNZ's Steele said.

Units in the Fonterra Shareholders Fund, which have gained about 20 percent since its debut last month, were steady at NZ$6.62. ($1 = 1.2006 New Zealand dollars) (Reporting by Naomi Tajitsu; Editing by Richard Pullin)

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