A Guaranteed Milk Price (GMP) will be offered on 60 million kg milksolids (MS) in two tranches.
Applications to supply 40m kg MS will open in June, offering a 12-month GMP.
In December, applications will open to supply 20m kg MS with a six-month GMP offered on production from December 1.
Further details will be provided in May, including the process to set the GMP price and allocate volumes to farmers applying.
The GMP for the 2014-15 season followed a successful pilot which involved 328 farmers who supplied 15m kg MS for a guaranteed price of $7/kg MS this season.
The $7 price was based on the opening forecast for the season.
The pilot attracted such a high level of support that applications were received to supply 37m kg MS. Participants were scaled back to 40% of their original application.
Chief financial officer Lukas Paravicini said the positive feedback from the pilot showed the GMP was a useful tool for farmers to manage price volatility and secure income certainty.
Having an opportunity to apply for the GMP in December meant farmers could follow the Farmgate Milk Price trend for the first half of the financial year before deciding whether to lock down the price for some of their production in the second half.
“GMP has given them certainty around a proportion of their income for this season,” he said.
“Having certainty means they have been able to confidently make decisions about servicing debt or making capital investments on farm especially when prices are volatile and this certainty comes regardless of the final milk price.
It is a useful risk management tool for farmers who want to take advantage of it.
Some may want to use it every year, others when they want financial certainty to undertake major projects or negotiate debt.”
He said the GMP also gave the co-operative certainty.
“We can lock in longer-term contracts with customers at a set price and attract a premium knowing there will be no risk with those contracts from price volatility.
Having this capability enables us to build long-term and mutually beneficial relationships with our key customers,” he said.
