Fonterra needed to ramp up milk supply for year-round manufacture of value-add products so had extended its winter milk collection sites to four by adding Kauri, near Whangarei in Northland.
The consumer and food service products included UHT milk and cream at Waitoa, Waikato, and its domestic liquid milk and specialty products needs.
Fonterra also needed to source winter milk for its processor customers who bought under the Dairy Industry Restructuring Act entitlement.
Both contract and non-contract winter milk premiums would be paid over 61 days in 2017, compared with 92 days for contracts in previous years.
Fonterra had also eased the contract terms regarding under- and over-supply and modified the adjustment factors for milk transport distances.
In the South Island a premium of $4.25/kg milksolids would be paid for contracted milk from mid-June to mid-July and $3.60 for the fortnights either side of that period.
In the North Island $3.50 was on offer for the month of June with $2.85 payable in the late-May and early-July shoulder periods.
The non-contracted rates were $1.40 and 70c in the South Island and $1.20 and 50c in the North Island, for the same periods as the contracts.
Non-contracted winter milk payments were not subject to transport adjustments.
Farm Source Waikato regional head Paul Grave said Fonterra now had four designated North Island winter milk processing sites – Kauri, Takanini, Waitoa and Longburn.
The addition of Kauri, near Whangarei, was a big boost to Northland farmers, many of whom already autumn-calved for a whole herd or part herd and had until now been paying the transport adjustment for a further 175km to Takanini, South Auckland.
The premium adjustment factor was now 2.5c/kg deducted for every 10km travelled between the supply farm and the nearest designated plant.
For the purpose of comparison, Grave said the new North Island contract rates averaged out at $2.10 premium across 92 days, compared with $1.90 last winter.
But because the contract period was only 61 days, farmers would receive an extra benefit from paying the transport deduction for the shorter period.
The wider tolerance on supply volumes would also be a benefit.
All winter milk premiums were payable in full on the 20th of the month following production, on top of the applicable advance rate for that month.
“We consulted widely before revamping the winter milk scheme and farmers told us they wanted more flexibility, which is what we have delivered.”
The non-contracted winter milk option was for those farmers uncertain about winter conditions or testing their own ability to more reliably deliver in future.
For farmers, a great deal of preparation, change and commitment went into setting up for winter milk production, Grave said.
They would need to make careful decisions, take advice and be ready to sign up before the end of March.
