Fonterra’s Fixed Milk Price (FMP) program has seen mixed participation this season, with farmers showing preference for offerings closer to $8.40 per kg of milksolids, according to the latest data.
The dairy cooperative’s FMP offerings, which allow farmers to lock in prices for their milk, filled only half of the available volume across the current season. Participation has been notably selective, with only the April offering, priced at $8.41 per kg for 30 million kg of milksolids, becoming oversubscribed by 10%.
Contrastingly, other months saw lower engagement, with under-subscription rates varying significantly. March’s offering was the least undersubscribed at 15%, followed by June at 61%, despite a competitive price of $8.40 per kg.
Detailed analysis of the five-month period reveals a clear pattern: farmers are more likely to engage with the program when prices are approximately $8.40 per kg. The pricing strategy, influenced by the SGX-NZX milk price futures and adjustments post-Global Dairy Trade events, aims to offer competitive rates to farmers, aligning closely with the broader market dynamics.
However, the 40-cent price variation observed across the offerings indicates a cautious approach from farmers, aligning their participation with more favorable pricing structures. Despite fluctuations in global dairy commodity prices, such as the 6.9% drop in early July, there has been no significant increase in participation, suggesting that farmers are maintaining strategic decisions based on expected market movements and personal financial assessments.
As Fonterra continues to adjust its FMP strategy, the focus remains on aligning with market trends and farmer expectations to enhance participation and stability in pricing for the upcoming seasons.
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