Business

New Zealand's Fonterra raises dividend to help farmers

Dairy cows are milked on a farm in New Zealand Image copyright Getty Images
Image caption Dairy exports are the main contributor to New Zealand's economy

The world's biggest dairy producer, Fonterra, has increased its dividend to help struggling farmers in New Zealand cope with the collapse in dairy prices.

The payment to shareholders and co-operatives is also being brought forward after first-half profit more than doubled to NZ$409m (£194m; $276m).

Milk prices have tumbled to multi-year lows because of a global supply glut.

The fall in dairy and other commodity prices has made it cheaper for Fonterra to make products such as cheese.

But conversely it has also dramatically reduced the incomes of its farmers.

The Auckland-based company has faced a challenging global environment over the past two years, including slowing demand in its top export market China.

Fonterra chairman John Wilson admitted there was "unprecedented pressure" on their farmers.

"The timing of these payments will help farmers' cash flows at the time of the season that they need it most," he said in a statement.

Image copyright Getty Images
Image caption New Zealand's Fonterra is the world's largest dairy producer

"The months May through to August are typically the most difficult financially for farmers, with lower forecast milk payments in these months".

Dairy economy

Fonterra has more than ten thousand farmers working for it in New Zealand.

The country's central bank estimates 80% of them will operate at a loss for a second straight season because of the low milk prices.

During Fonterra's interim results briefing, Mr Wilson added its farmers could not be held accountable for movements in the commodity markets.

"They know they have to hang in there and farm through the cycles," he said. "I do not take their grit and determination for granted".

Shares of Fonterra fell by 0.3% in New Zealand following its results.

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