Fonterra has broken records with the allocation of 120 million kilograms of milk solids (kgMS) in its Fixed Milk Price programme for the 2024/25 season, marking the highest-ever total since the programme’s launch in 2019. The record allocation demonstrates growing farmer confidence in Fonterra’s efforts to provide price stability in a turbulent dairy market.
Growing Farmer Confidence
The Fixed Milk Price programme has experienced consistent growth since its inception. For the 2024/25 season, nearly 3,500 applications were submitted by 1,778 farms—an increase from the previous year.
This surge in participation reflects growing trust among farmers in the programme’s ability to provide income stability amid the uncertainty of fluctuating dairy markets.
Lisa Payne, Fonterra’s milk supply director, remarked on the achievement, stating, “It was great to reach that milestone this year.”
She emphasised the role of the FMP programme in mitigating market risks, adding, “The market for dairy commodities can be extremely volatile, so our Fixed Milk Price programme is there as an option for farmers who may want to have greater certainty around their income.”
Record Allocation and Market Dynamics
This year’s 120 million kgMS allocation surpasses the previous record of 86 million kgMS set in 2022. Prices offered through the programme ranged from $8.09/kgMS to $10.10/kgMS, with a service fee of 10 cents per kilogram deducted.
In April and August, demand exceeded the allocation limits, reflecting heightened interest from farmers.
The broader dairy market remains dynamic, with price fluctuations influenced by global factors, including Chinese stockpiling ahead of the Lunar New Year.
Recent Global Dairy Trade (GDT) auctions saw whole milk powder prices rise by 4.1% to US$3,984/MT, although a slight dip in prices was noted in the final auction of 2024.
Implications for Fonterra’s Strategy
Fonterra’s Fixed Milk Price programme is not only beneficial for farmers but also integral to the co-operative’s strategy. Fonterra can lock in longer-term contracts and offer price-risk management solutions to its customers by securing predictable income for its suppliers. Payne highlighted this aspect, noting, “These solutions are often a key reason some of our customers prefer Fonterra as a supplier.”
The co-operative is also exploring enhancements to the programme, with new features expected to be announced before the first application window in March 2025.
A Broader Context
The record allocation comes at a time of projected high farmgate milk payouts, with Fonterra forecasting up to $9.50/kgMS—a potential record for the co-operative. The co-op is concurrently pursuing divestment plans for its global consumer businesses, including well-known brands such as Anchor and Mainland.
CEO Miles Hurrell commented on the increased milk price forecast, stating, “Demand has been seen out of China, where there are indications that domestic production is below expectations.”
Looking Ahead
Fonterra’s Fixed Milk Price programme continues to deliver, offering a proactive approach to market volatility while enhancing farmers’ financial stability.
The record participation and allocations reaffirm the co-op’s strategic role in global dairy markets, employing forward-thinking tools to solve industry challenges and secure long-term sustainability.
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