A $1.2 billion Fonterra profit has dairy farmers exhaling, but still holding their breath in hope of further relief on October 9 when the OCR may come down.

Fonterra last week reported strong FY24 full year financial results, including a final 2023/24 season farmgate milk price of $7.83 per kgMS and a total dividend of 55 cents per share.

Chief executive Miles Hurrell said the payout reflected Fonterra’s continued strong earnings performance and the long-term resilience of the co-op.

“We’ve maintained the positive momentum seen in FY23 and delivered earnings at the top end of our forecast range,” he said

“Our total dividend of 55 cents per share is the second largest since Fonterra was formed. It includes a 15 cent interim dividend and a 25 cent final dividend driven by strong FY24 earnings.

“In addition, our capital management efficiency and ongoing balance sheet strength have enabled us to return an extra 15 cents per share to farmer shareholders and unit holders through a special dividend.”

Mr Hurrell said the final farmgate milk price for the 2023/24 season had finished at $7.83 per kgMS.

“This, combined with the 55 cents per share dividend, provides a total cash payout to a fully shared-up farmer of $8.38 per kgMS,” he said.

Thornton dairy farmer and former Bay of Plenty Federated Farmers president Alan Law said the financial result was good news.

“It’s about time – it has been hard for the last 10 years,” he said.

Farmers will use the money to reduce overdrafts and to catch up on deferred maintenance.

“They will also catch up on fertiliser,” Mr Law said.

“For many years farmers have put on none or less fertiliser than they should have.”

Mr Law said farmers had for many years avoided speculating and hoping for economical improvement.

“What we have learned during the uncertainty over the last several years is to not count our chickens until they come home to roost,” he said.

“The so-called experts that speculate about these things probably don’t know more about it than you and I.”

Mr Law said farmers now hoped for a second round of good news on October 9, when it was possible the OCR would come down.

“We’re hoping to see a reduction in mortgage rates,” he said.

Farmers getting more disposable income would benefit the wider community as they would spend more on a range of goods and services, including environmental improvements on their farms.

FARMit Accountants co-owner Gina Webster said over the past couple of years, dairy farmers had been hit with a tough mix of challenges.

“This includes unpredictable weather, volatile global demand, rising costs, and tighter compliance regulations – all while facing lower farmgate milk prices,” she said.

However, Fonterra’s recent strong financial performance was a bright spot on the horizon.

“With profits up, the forecasted milk price of $9 for the 2024/25 season is a welcome boost, providing much-needed financial relief at a time when farmers are dealing with rising costs for feed, labour, and meeting environmental standards,” Ms Webster said.

The stronger dividend payments would also give farmers an extra income stream, helping to strengthen their business and make them more sustainable in the long run.

“However, while these payouts are certainly good news, farmers aren’t out of the woods yet,” Ms Webster said.

“The pressure of increasing costs, from complying with stricter environmental rules to dealing with unpredictable weather, continues to strain their operations.”

Even with the higher milk price, the gains might not be as significant as they could be, as the global dairy market remained fragile, with demand easily affected by economic and political issues worldwide.  

“Farmers will still need to be smart and careful in managing their farms and preparing for the future,” Ms Webster said.

“The potential for a lower OCR and reduced interest rates will bring welcome relief, improving cash flow and allowing farmers to catch up on repairs and maintenance, fertiliser, and compliance costs—boosting both their business and the local economy.”

Ms Webster said despite the challenges ahead, “there’s a real sense of hope for the future”.

“With Fonterra’s strong results and the possibility of some financial relief, farmers can start to breathe a little easier, focusing on keeping their farms stable and continuing to invest in both their business and the communities they’re a part of.”