Milking

Background

7 innovative financial tools for better milk price certainty

Fonterra will introduce a new financial tool to help their farmers gain more certainty about what they will be paid for their milk for the season.

The new Fixed Milk Price can help them with budgeting, planning, and managing on-farm profitability. Fixed Milk Price joins a set of 7 innovative financial tools to assist farmers in sharing up and investing in their farms. These tools include:

  1. share-up over time contract
  2. invest as you earn
  3. dividend reinvestment plan
  4. strike price contract
  5. contract fee for units
  6. farm source’s reward dollars for shares
  7. smart finance.
 Fonterra incorporated feedback from its farmers on previous pricing tools and ensured that Fixed Milk Price is more transparent, flexible and accessible. Photo: Colleen Tunnicliff
Fonterra incorporated feedback from its farmers on previous pricing tools and ensured that Fixed Milk Price is more transparent, flexible and accessible. Photo: Colleen Tunnicliff

How it will work

In the development of this new tool, Fonterra incorporated feedback from its farmers on previous pricing tools and ensured that Fixed Milk Price is more transparent, flexible and accessible. How it will work:

  • All Fonterra farmers will have the opportunity to participate on a monthly basis (excluding January and February).
  • 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% 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% of New Zealand milk supply available in a given season.

Farmers were also updated today on the Co-op’s plans to provide them with more meaningful recognition and rewards in season 2019/2020 for producing high quality, safe, sustainable dairy.

Once all input is received, the new approach will be finalised for introduction in June 2019.

[Source: Fonterra]