Fonterra yesterday released a record payout for the current season - and then forecast its payout next season would be its third-highest ever.
For the 2010-11 season, Fonterra has increased its payout range before retentions by 10c to $8 to $8.10 a kg of milk solids, well up on the $6.70 paid last year.
The "average" Otago dairy farmer's income will rise to $1.42 million this year, from $1.19 million last year, and the "average" Southland dairy farmer's income to $1.48 million this year, from $1.23 million last year.
Next season, the opening forecast payout range is $7.15 and $7.25 kg/ms.
About $12.1 billion will this year flow into the economy from the entire dairy industry, with about $11 billion expected to be generated from the opening forecast for next season.
Federated Farmers dairy chairman Lachlan McKenzie welcomed the higher forecast payout for this season but noted it was revenue and not profit.
Farmers came under attack at the weekend from Labour Party leader Phil Goff, who wanted them to join the emissions trading scheme in 2013, two years earlier than planned.
Mr Goff said that would bring in $800 million Labour would use for the Research and Development tax credits.
Mr McKenzie said that over the current season, the milk price forecast had increased by 90c and that would generate about 4140 full-time jobs in the wider economy.
"I confidently predict that New Zealand's dairy farmers will pay well over $300 million in direct taxation if this forecast holds up. That's a sizeable chunk and doesn't include the tax that will be paid by farmers on their shares in Fonterra."
Dairy farmers would put billions more into the economy by way of wages and buying what they needed to farm, he said.
"We're paying our fair share and the public deserve to hear that said aloud."
While dairy was an economy dynamo, 65% of the milk price forecast for next season was eaten up by farm business costs, Mr McKenzie said.
"The balance, say around $2.60 kg/ms, or 23c per litre of milk, is what we have to pay the mortgage and Inland Revenue before we can put any food on our tables."
If the 90c appreciation in the milk price this season was reversed, the average farmer would have made a loss.
That was the reality of farmer margins and why Federated Farmers cautioned farmers to run conservative budgets, Mr McKenzie said.
Green Party co-leader Russel Norman said bringing agriculture into the ETS sooner was fair, especially given the strong position of the dairy industry.
The Ministry for the Environment had estimated dairy farmers would pay an extra 2.5c kg/ms if they were in the ETS.
"I doubt many would even notice the additional cost of paying their fair share of their emissions footprint," Mr Norman said.
The final payout will be confirmed when Fonterra announces its annual financial results in late September.
Fonterra chief executive Andrew Ferrier said when the previous forecast was released in February, Fonterra highlighted how the margin squeeze due to higher milk prices was affecting operating earnings, especially within the co-operative's ingredients business.
Since February, the ingredients business had recovered some lost ground in terms of operating earnings and Fonterra's ability to make profits above raw milk costs for other dairy product streams had improved.
"On the down side, our consumer business in Australia and New Zealand has faced earnings pressure.
"This business is partially absorbing higher dairy ingredients costs due to intense market competition and because of initiatives such as our decision to freeze the price of liquid milk sold to retailers in New Zealand," he said.
