Wellington, May 17 NZPA - Fonterra may be able to build farmer payout as high as $8/kg of milksolids in the coming dairy season, says an industry commentator.

New Zealand Farmers Weekly, owned by the NZX, said indications had been given at recent shed meetings between Fonterra and farmers that there could be a big jump in the payout by the end of the 2010-1011 season, with the forecast starting off around $6/kg of milksolids.

Fonterra chairman Sir Henry van der Heyden has publicly warned farmers about volatility in the dairy market, but has also suggested farmers should budget for milk prices "around this year's level".