The company will handle contract supply agreements for non share-backed farms and is branded to differentiate the contract business from Fonterra’s shareholder brand FarmSource.
Mymilk suppliers will receive payments linked to but not exceeding Fonterra’s milk price and can hold the contract for a maximum of five years.
The company’s chief executive Richard Allen said the contracts are on a farm rather than farmer basis, so an existing shareholder who also has a farm that does not have any share-backed supply could become a mymilk contract supplier.
Mymilk has a cap of 5% of Fonterra’s national supply and the aim is to sign up people who have a desire to become fully fledged shareholders.
Fonterra Shareholders’ Council has backed the move which is designed to help Fonterra capture a share of new milk in Canterbury, Otago and Southland – something it’s struggled to do in the past three seasons.
While the total supply of milk from farms increased, its proportion of the national supply fell to 87% last season and the mymilk plan was designed to claw some of that loss back.
In 2007 Fonterra came under fire from suppliers and competitors over tactical milk pricing, where it offered some farmers a better milk price in areas where competition was rife.
But the general feeling among farmers is that the mymilk plan differs in that it is transparent and finite with contract farmers expected to make some move to share up over time.
There is still some concern that the contracted new milk won’t be contributing to the capital cost of processing expansions required to cope with supply growth.
