The dairy exporter is introducing a Co-operative Difference payment of up to 10 cents a kilogram of milksolids if a farm meets on-farm sustainability and value targets from June 1, 2021.
“It makes sense to financially reward those farmers who go the extra mile to help our co-op differentiate its milk,” Fonterra chief executive Miles Hurrell said.
The payment, however, is not in addition to the milk price normally paid to farmers.
“The total farmgate milk price will remain the same across the co-operative but the amount that each individual farm is paid will vary depending on their contribution under the Co-operative Difference,” Hurrell said.
“Basically, it’s a case of if you tick all the boxes then you get the full payment, if you don’t then you are penalised so not really a bonus for those that go above but a penalty for those that don’t achieve,” Federated Farmers president Andrew Hoggard said.
The more a farmer achieves in the Co-operative Difference programme the higher the payment will be.
The precise payment structure will be confirmed over the next few months following discussions with farmers but will be no more than 10 cents/kg MS for the 2021-22 season, Fonterra said.
The amount and targets will be set annually by Fonterra’s board.
A Fonterra spokesman said the amount each farm is paid for milk is influenced by a number of factors specific to that farm, not just the Co-operative Difference payment.
“A farm’s level of achievement under the Co-operative Difference will influence how much they are paid by up to 10 cents in the 2021-22 season but due to the other payment parameters that may or may not result in their overall price being lower than the average farmgate milk price.”
Hoggard said it’s important to see how it plays out but he’s concerned it might become a box-ticking exercise and could be rather subjective.
He feels Fonterra should have consulted farmers more to ensure it has it have it right and is using all information sources.
Fonterra launched the Co-operative Difference last year to help farmers produce high-quality, sustainable milk and prepare for any changes needed in future.
It forecasts it will pay its farmers in a range of $5.40 to $6.90/kg MS in this season. – BusinessDesk
