Friday, March 29, 2024

Communication key in new Fonterra payout scheme

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Fonterra sharemilkers and contract milkers have been urged to talk to their farm owners to determine the fairest way to distribute the new 10c co-operative difference framework.
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Federated Farmers sharemilkers’ chair Aaron Passey says theoretically it should be as simple as having a discussion with the farm owner but in practice, it may come down to the negotiating skills of both – and how comfortable they were at having that discussion.

Most 50:50 sharemilkers would have already signed their contracts and any agreement around the payment should be included in the milk payment part of the agreement, reflecting the percentage the sharemilker receives.

He says the situation was different for others.

“Lower order and contract milkers will be right in the thick of signing contracts at the moment,” Passey said.

The new framework would see that from June 1, up to 10c of each farm’s milk payment will be determined by the farm’s sustainability credentials and milk quality.

Seven of the 10c are determined by achievements in environmental and social areas of farming, and the remaining 3c is for milk quality.

The payment is not an addition to the average farm gate milk price forecast, but will be part of the milk payment parameters used by Fonterra when paying each farmer.

Passey says for contract milkers it got “interesting” because they had already negotiated the payment for their services,

It would be up to them to negotiate with farm owners to ensure they were compensated if they qualified for the payment.

“Just be open about it, you’re not going to come off worse if you don’t mention it at all and talk to the farm owner to try to come up with a position that’s fair to each party,” he said.

He also suggested due diligence by both parties to ensure each was committed to achieving the 10c payment.

Federated Farmers sharemilker farm owners’ chair John Numan says prior to the change, contract milkers or herd-owning sharemilkers were paid a penalty of 100% of the downgrade of the milk.

He understood the 3c portion of the new parameters related to milk quality would be evenly split between the two parties, and there may have to be some allowance for that in the contracts.

When applying for a job, contract milkers or herd-owning sharemilkers would know quickly if the farm would qualify for the payment by observing its infrastructure.

The timing of the announcement disappointed Numan, given that many of next season’s contracts are either about to be signed or already signed.

“I’m a little disappointed Fonterra didn’t put the workings in place as a pre-run dummy trial for one year because a lot of the contracts would have been signed before this was announced,” Numan said.

Waikato farmer Ben Moore is one of the farmers consulted by Fonterra prior to the new framework being released.

He says the issue of payments to sharemilkers and contract milkers was raised during the consultation.

Another argument raised was whether the payment was contrary to the co-operative idea of everyone being paid the same.

Moore says if there were two farmers and one was farming in a way that is environmentally compliant and the other was not, was it fair that they are both paid the same by Fonterra?

“Is that in the co-operative spirit?” he asked.

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