NEW Zealand dairy giant Fonterra is introducing a fixed milk price system for farmers wanting more certainty about what they will be paid for their milk for the season.
The co-op says the new fixed milk price can help producers with budgeting, planning, and managing on-farm profitability.
The fixed milk price will be linked to the New Zealand Stock Exchange milk futures market price, minus a service fee capped at 10 cents a kg of milk solids.
During a season, farmers will be able to set up to 50 per cent of their estimated milk production. Fonterra will make at least one million kg of milk solids available a month and up to five per cent of its New Zealand milk supply in a given season.
Similar programmes are offered to farmers in the European Union and the United States.
Fonterra in December cut its farmgate milk price forecast for 2018/19 to NZ$6.00-NZ6.30 (£3.17-£3.33) a kg of milk solids from a previous range of NZ$6.25-NZ$6.50 (£3.30-£3.43), saying the global milk supply is outpacing demand.
Fonterra farm source chief operating officer Robert Spurway says last season showed 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 it’s farmers who feel the brunt of it,” Spurway says.
“The fixed milk price will also provide the co-operative with certainty on the margins it can achieve on a portion of milk supplied.”
Fonterra also plans to give its suppliers more meaningful recognition and rewards in 2019/2020 for producing high quality, safe, sustainable dairy.