It received applications totalling 45.2 million kg MS (about 2.5% of total supply), from 443 farmers, more than double the number of farms that applied this time last year.
The offer was over-subscribed for the allowance of 40m kg, so applications were accepted from the lowest price upwards and applications made at $5.25 were scaled back in volume by 16.5%.
The popularity of the GMP scheme this year followed last season when two offers were under-subscribed but the milk price kept falling and those with GMPs of $7 contracted in June and $4.70 contracted in December came out ahead of the market.
Yet the previous season, when the GMP scheme was launched, those who locked in at $7 were under selling milk that was eventually worth $8.40 in the giant Fonterra price pool.
Fonterra’s group director co-operative affairs Miles Hurrell said more farmers were seeing GMP as a financial risk management tool and were choosing to lock in a price for a percentage of their milk production.
The rules allow up to 75% of seasonal production from one farm to be locked in under GMP.
“We received a good range of applications from small to large farms, which will now be able to use this income certainty to help to better budget and plan for this season.”
Farmers had the opportunity to apply for a GMP at one or more of five prices at and below the opening forecast farm gate milk price, currently $5.25.
There will be another opportunity, in December, for a total of 20m kg.
The GMP scheme has caused some dissension within Fonterra, with opponents saying that it broke the fundamental co-operative principle of equal treatment for all suppliers.
The GMP scheme would remain at 60m kg a season for the time being because Fonterra was comfortable with that volume being available to forward sell to customers.
Extreme volatility in world dairy prices created the opportunity for and attraction of a GMP scheme for farmers but the flip side was the outcome for customers who might get caught with higher-priced products than could be obtained on world spot markets.
Senior Fonterra executives presented to overseas unit holders and bondholders this month and one of their presentation slides showed volatility of plus or minus 60% in whole milk prices between 2006 and 2015, versus only 30% in the previous 15 years.
