At meetings across Canterbury, Southland and Otago last month MyMilk committed to paying a milk price in the range 0-15c below Fonterra’s farmgate contract milk price but has now added on its 5+5+5 incentive scheme for farmers to increase the price.
The incentives, each worth up to 5c/kg of milksolids, offer a total potential gain of 15c above the MyMilk price provided the final price does not exceed Fonterra’s farmgate price.
“We will never pay more than the Fonterra contract price but these new incentives will give our suppliers more certainty that they can earn a price that is at the top of our range,” MyMilk chief executive Richard Allen said.
The incentives, based on volume, quality and proximity, would also benefit Fonterra with higher volumes of milk that was better quality and more efficient to collect, Allen said.
Under the volume incentive MyMilk would pay an incremental one cent on each 100,000kg MS supplied, up to a maximum of 5c/kg MS across all MyMilk farms owned and controlled by the same person or entity.
The quality incentive, also up to a maximum 5c/kg MS would pay five cents to individual farms that achieved zero demerits for the season for the milk produced on that farm and three cents to farms which incurred only one demerit for the season.
“We will never pay more than the Fonterra contract price but these new incentives will give our suppliers more certainty that they can earn a price that is at the top of our range.”
Richard Allen
MyMilk
“We want individual farms to be rewarded for efforts to maintain milk quality.”
Under the proximity incentive, also up to 5c/kg MS, MyMilk farms would receive a one-cent bonus for every MyMilk farmgate within a 10km radius of the individual farm’s main tanker access gate, to a maximum of 5c/kg MS.
“It is more efficient for MyMilk to manage and collect from farms close together and we are happy to pass this benefit on to our suppliers,” Allen said.
The new Christchurch-based milk sourcing company was a wholly-owned subsidiary of Fonterra but it had no requirement for farmers to buy shares and no limit on milk volumes.
It had a clear mandate to grow Fonterra’s milk supply.
“What we have to do is strengthen the co-operative. The goal is to get milk into Fonterra,” Allen said.
“MyMilk is recognition of change in the industry. We have to attract new milk and the benefit of MyMilk, as a new company doing that, is more flexibility.”
MyMilk was tracking ahead of schedule since its launch in December with a significant portion of milk already signed up for next year as the company geared up to start collection in the 2015-2016 season.
