The move is part of Fonterra’s strategy to add value to New Zealand milk and responds to increasing demand from customers for sustainably-produced dairy. The payment will be funded out of the Farmgate Milk Price.
“The total Farmgate Milk Price will remain the same across the cooperative, but the amount that each individual farm is paid will vary depending on their contribution under The Co-operative Difference, in addition to the other variables, like fat and protein, which affect the amount that’s paid,” Fonterra CEO Miles Hurrell said.
“We’ve always paid our farmers based on the value that milk provides to the cooperative. The reality is that the drivers of value are changing, and we need to reflect that. Our customers want to know that the products they are buying are not only safe, but also produced sustainably.
“This payment helps us meet the changing needs of our customers, so they continue to choose our milk and enjoy dairy as a sustainable and nutritious choice.
“We want to deliver the innovation, sustainability and efficiency needed to make the most difference to our strategy and our bottom line. It makes sense to financially reward those farmers who go the extra mile to help our Co-op differentiate its milk.”
The payment will replace the Farm Source Reward Dollars farmers currently earn through The Co-operative Difference and will work on a tiered system. The more a farmer achieves in The Co-operative Difference program, 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 per kgMS.
“We want farmers looking to the future, and The Co-operative Difference encourages them to continue to focus on the things that will create the highest value milk. This helps us create higher value products that stand out in the global market for their New Zealand-ness and the sustainable way they’re produced,” Hurrell said.