Fonterra has announced a further increase in the forecast payout to its farmer-shareholders for the current 2009-10 season, but the company also cautions on market volatility.

The Milk Price increases NZ$1.10 to NZ$5.70 per kilogram of milksolids (kgMS), while the Distributable Profit (Value Return) is 15 cents lower at 35 cents per kgMS. 

This means the Co-operative's forecast of the total amount Available For Payout increases 95 cents to NZ$6.05 per kgMS. 

The new forecast compares with an opening forecast for 2009-10 of NZ$4.55 per kgMS and a revised forecast of NZ$5.10 per kgMS announced on September 22, 2009. 

Fonterra Chairman, Sir Henry van der Heyden, says although the recovery in consumer demand and the global economic situation remain relatively fragile, the higher forecast reflects the Co-operative's increasing confidence around the recent gains in international dairy prices.

The improvements in global dairy markets strengthen the notion that dairying is a good business with sound long-term prospects, both for Fonterra shareholders and the New Zealand economy, said Sir Henry.

But he warned that such a big gain in the payout forecast shows the volatility in the market.

The market is now heading in the right direction but there is a risk of rapidly rising prices potentially bringing in more milk imports, which happened in 2007 and resulted in a quick fall of the market, he said.