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It seems milk has really turned to gold for New Zealand dairy farmers.
They are celebrating their best year ever with Fonterra's announcement of a record breaking milk payout, which is expected to inject $9 billion into the economy.
Twelve months ago dairy farmers had an average gross income of half a million dollars. Now it's closer to $900,000.
Fonterra has made a final upwards adjustment to the current seasons payout, from $7.30 to $7.90 and announced a record payout for the coming 2008/2009 season of $7 per kilo of milk solids.
"The board is very confident about the business going forward. I'm sure this announcement will be very positive for our dairy farmers," says Henry van der Heyden, Fonterra Chairman.
The new forecast for the current season is made up of a milk price of $7.55 and a value component of 35 cents.
The continued strength of international dairy commodity prices - underpinned by a shortage of New Zealand production due to the drought - a weakening New Zealand dollar, and performance gains within Fonterra are all key reasons for the payout.
However, the drought also increased feed costs and slashed incomes, not to mention big price increases for fuel and fertiliser.
"I'm 20,000 milk solids down on my farm. We're buying in unit loads of feed each month and that's all an expense that we're never had to incur before," says Richard Greenville, Waikato farmer.
"When people tell me farmers are creaming it, it annoys me a little bit. We're not exactly creaming it. Our costs are going up just like everybody else's costs are going up."
And there is a shock for farmers planning to sell out anytime soon.
For the first time Fonterra has dropped its share price by 18% to $5.57, partly because of the global credit crunch.
"We're finding our borrowing costs are going up. It impacts our cost of capital, and it hits our share price in a negative way," says Andrew Ferrier, Fonterra Chief Executive.
Fonterra's final payout for 2007/08 will be announced in September.
