The dairy co-operative, Fonterra will provide loans up to $15 million to its 50%-owned subsidiary, rural suppliers store RD1, for helping its supplier shareholders.

Farmers, reeling under high debt and lower pay outs, will get interest free loans on essential dairy supplies. The Australian Wheat Board will fund the interest costs of the loans through RD1, the biggest retailer of agricultural services, to dairy farmers of the country.

Barry Harris, Fonterra's director for milk supply, said that loan amount would be paid to the company by April 30 next year. He added: "It's a tough time for our farmers and we have been looking at every avenue we can to help them, particularly in finding ways to cut costs and manage cash flows while continuing to keep their farms productive."

Farm debt has increased to $45 billion, as per estimates of Federated Farmers, on accounts of low demand and high input costs for dairy products.
Meanwhile, Farmers are expected to be paid $4.55 per kilogram of milk solids for the 2009-10 dairy seasons as compared to $5.20 payout for the 2008-09 seasons.