Fonterra, New Zealand’s dairy co-operative, has wrapped up the first application phase for its fixed milk price programme for the upcoming 2024-2025 season, offering farmers $7.99 per kilogram of milksolids (kg MS). The complete price stands at $8.09/kg MS, inclusive of a service fee of 10 cents per kg MS.
The application window, open fr om March 11 at 7 am to March 12 at 7 pm, has drawn attention, although the exact number of participating farmers remains undisclosed.
Notably, Fonterra has implemented changes to enhance the functionality of its fixed milk price mechanism. Lisa Payne, Fonterra’s milk supply director, aims to refine the user experience for farmers while maximizing the benefits it offers. Payne highlights increased flexibility during over-subscribed events, wh ere demand surpasses the announced milk volume. For the upcoming season, Fonterra is prepared to adjust monthly volumes by up to 10% to meet farmer demand.
Moreover, Fonterra plans to double the milk volume available. The total volume allocated for applications for the 2024-2025 season has risen from 75 million kg MS to 150 million kg MS, constituting about 10% of the co-op’s total New Zealand milk collections. This strategic adjustment aims to solidify partnerships with key customers valuing price certainty and subsequently enhance shareholder benefits.
Additionally, Fonterra’s revised approach facilitates the establishment of long-term contracts and offers price risk management solutions to customers. According to Payne, such solutions enable the co-op to secure higher margins, with premium returns benefiting all shareholders.
The fixed milk price serves as a financial instrument for farmers seeking income predictability, allowing them to fix prices for up to half of their season’s milk supply based on independent market rates. Conducted monthly over ten months, farmers can opt into the programme according to their business needs.
The fixed milk price offerings for the current season exhibited variance, ranging from $8.68 (March) to $7.55/kg milksolids (July). While the initial offer garnered significant interest, subsequent offerings saw a decline in participation, exemplified by only 18 applications in July. Despite fluctuations, Fonterra remains committed to refining its fixed milk price tool to better serve the needs of its stakeholders.
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