Wellington, Sept 24 NZPA - The world's biggest dairy trader, Fonterra, says it is slashing its forecast payout for farmers this season, and holding back some of the profits.

Fonterra Co-operative Group today confirmed a final payout of $7.90/kilogram of milksolids for the 2007/08 season.

The milk price was $7.59/kg and the return on added value products 31c/kg.

But the actual final cash distribution to shareholders will be $7.66/kg after directors decided to retain 24c/kg from the value return part of the payout to strengthen Fonterra's balance sheet "in the light of instability in financial markets".

In total Fonterra will distribute $9.1 billion from the amount available for payout of $9.3 billion, a 65 percent lift on the 2007 season's distribution of $5.5 billion.

Fonterra directors also today lowered the payout forecast for the current 2008-20099 season to $6.60/kg from the $7.00/kg forecast in May.

The new $6.60 forecast comprises a milk price of $6.25 and a value return component of 35 cents.

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