Fonterra creates new Fixed Milk Price tool

Fonterra MilkFonterra has unveiled a new financial tool to help farmers to know exactly what they will be paid for their milk. The new Fixed Milk Price will help them with budgeting, planning and managing on-farm profitability.

The Fixed Milk Price adds to the other tools of the cooperative including the Share-up Over Time Contract, Invest as You Earn, Dividend Reinvestment Plan, Strike Price Contract, Contract Fee for Units and Farm Source’s Reward Dollars for Shares and Smart Finance.

“As a cooperative owned by 10,000 farming families, we are committed to making a difference for Fonterra farmers and providing flexible options will help them share up, invest on farm, and manage financial exposure,” Farm Source and Global Operations COO Robert Spurway said.

“This season reminds us of the volatility in the global marketplace and the impact it can have on the milk price. While the co-op manages this volatility as best it can when selling our products, we recognise that it’s farmers who feel the brunt of it.

“In addition to providing farmers with the opportunity to get more price certainty, the Fixed Milk Price will also provide the cooperative with certainty on the margins it can achieve on a portion of milk supplied. It’s a win-win.”

The Fixed Milk Price will be referenced to the NZX Milk Futures Market, minus a service fee of no more than 10c/kgMS initially. Over the course of a season, farmers will be able to fix up to 50 per cent of their estimated milk production per farm. Fonterra will make at least 1 million kgMS available at every event and up to a total of 5 per cent of New Zealand milk supply available in a given season.

Fonterra also plans to provide farmers with more meaningful recognition and rewards in season 2019/2020 for producing high quality, safe and sustainable dairy.

“Fonterra farmers have long led the way when it comes to milk quality, animal welfare and environmental best practice, and should be recognised for the difference they are making as a co-op,” said Spurway.

“We will better recognise the many farmers who go above and beyond to produce world class dairy, care for their animals and protect the environment for generations to come. At the same time, we’ll target support to those farmers who want to make improvements.”

Fonterra will also set out a clearer approach on how to manage situations where minimum standards are not being met, to protect the reputation of farmers and the wider industry. Once all input is received, the new approach will be introduced in June 2019.

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