"Current market views supported by our own forecasting indicate commodity prices improving later this year or in early 2015, with global demand for dairy continuing to grow year on year," says chairman John Wilson.
"While the long-term market fundamentals remain sound, we need to recognise that the current market conditions are difficult and there remains further downside risk.
"There is still volatility. This reflects challenges with supply and demand following a good dairy season globally. Given these factors, the forecast is our best judgement at this time."
Along with a previously announced estimated dividend range of 20-25 cents per share, the forecast Cash Payout for the season is $6.20-$6.25.
Wilson says the reality is Fonterra expects to see ongoing volatility therefore farmer should be prudent with costs. "If market conditions change our view, we will update them."
An update on business performance will be provided along with Fonterra's annual result on 24 September 2014, says Wilson.
Meanwhile, Fonterra's board has given the green light to build a new high efficiency milk powder drier in the North Island and further increase milk processing capacity in the South Island to help meet global demand for dairy products.
Fonterra's CEO Theo Spierings said this investment, totalling $555 million, will not only grow the co-operative's processing capability but allow for more flexibility to better optimise production.
