Fonterra cuts dividend, payout unchanged FONTERRA has slashed its forecast 2014 dividend payment by two thirds, while keeping its forecast farmgate milk price at a record high. The world's biggest dairy exporter cut its dividend forecast to 10 NZ cents a share from 32 NZ cents while keeping the milk price at $NZ8.30/kg of milk solids. "They are in a slightly difficult position where they have to balance the interests of farmers with the interests of investors in the Fonterra shareholders fund so I would read this as attempting to balance that," said Matt Goodson, managing director at Salt Funds Management, which has a small holding in the Shareholders' Fund. "The price had a tremendous run since IPO and it seemed to be almost a slight misunderstanding of exactly what the shareholders fund was, some people seem to think it was a just pure play on overall milk prices or overall milk industry health but as we have seen today it is a little different to that," he said. The announcement surprised economists who had been predicting an increase in the milk price and Fonterra's board confirmed it had used its discretion to keep the price below calculations that would have seen the price forecast lifted by 70 NZ cents/kg. Fonterra forecast 2014 earnings before interest and tax of $NZ500 million ($A459.50 million) to $NZ600 million. Chief executive Theo Spierings said Fonterra was "limited by the nature of Fonterra's existing production facilities in New Zealand" and was already pushing the maximum possible volume of milk into whole and skim milk powder streams. As part of a strategy to lift milk powder production, Fonterra announced it had approved spending of $NZ235 million for a third powder drier at Pahiatua. It held the official opening of its drier at Darfield, the world's largest, last weekend. "Over the next few months we will look at additional measures that will further improve our ability to provide higher volumes of the dairy commodities global customers want - when they want them," Mr Spierings said in the statement.