Wellington, May 26 NZPA - Fonterra farmers -- and the rest of the nation's cow cockies -- look set for a major boost when the new dairy season begins next month.

Fonterra has promised to give them a running start by lifting their milk payments 8 percent from this season's $6.10/kg milksolids to $6.60 with the potential earnings hitting $7.10 once dividends are included.

"Our forecast for next year would put about $600 million extra into our farmers' pockets and ultimately into the New Zealand economy so it's a great outcome for our farmers," says Andrew Ferrier, Fonterra chief executive.

But the company also said that if prices and foreign exchange rates don't change too much the pool of money for their milk payments and dividends will jump to over $8/kg.

That would mean its 10,500 farmers are in line for an average payout of nearly a million dollars each -- and farmers with several farms will be receiving multi-million-dollar payments.

This season's payout is predicted to be $6.60 -- an average cheque of $800,000 -- before the cooperative deducts retentions equivalent to between 25 percent and 35 percent of the dividend, or 15c to 21c from a 60c dividend.

It will be the company's second-highest payout so far, trailing only the $7.90/kg payout of 2007-2008, which was based on revenues of $19.5 billion for the 14 months ended July 31. In a normal 12 month year the company turns over about $17 billion.

Farmers who do not have problems on their balance sheet -- such as large levels of debt -- will be able to build their investments, but the national farm lobby, Federated Farmers, has warned them not to count on their milkflows turning into white gold.

"Farmers and Fonterra need to make hay while the sun shines," said Federated Farmers dairy chairman Lachlan McKenzie. "If anyone thinks this will lead to another dairy boom then they should think again."

The farm lobbyist said next year will not be 2007-2008 revisited: there had been few conversions of drystock properties to dairying in recent times, and only half a dozen dairy farms were reported to have been sold in April.

"Budget conservatively and use any windfall to retire debt, especially expensive short-term facilities," he urged.

Fonterra has warned commodity markets have become more volatile in recent years.

The present season opened with an "eye-watering" forecast $4.55/kg, noted Mr McKenzie but improving commodity prices has boosted that to the latest $6.50-$6.60 estimate.

Fonterra Shareholders' Council chairman Blue Read said the cooperative's $6.90- $7.10 opening forecast for the 2011 season was "great news" -- but he also advised farmers to remain "vigilant" in managing their businesses.