Fonterra moves to milk tender pricing

By Alana Christensen

Fonterra Australia is offering farmers the opportunity to lock in a set price for up to 70 per cent of the season’s milk in a bid to lessen the impacts of market volatility, with this year’s price range to be announced by May 11.

The milk processor’s fixed base milk price initiative works through a tender process whereby Fonterra accumulates a range of milk volumes and price offers from suppliers and matches these with customer demand.

For the current season the average price is $5.80/kg MS.

Farmers nominate a price for their milk that they are comfortable with, for a volume of between 20 and 70 per cent.

Through this process, a clearing price is generated which maximises the volume of milk sold at the best achievable price.

Applications are available to existing Fonterra farmers and new suppliers who want to supply Fonterra in the next season.

Fonterra Australia farm source general manager Matt Watt said the initiative would help give suppliers more certainty throughout the season by delivering a more stable income.

‘‘Volatility in dairy is a fact of life. From what we’ve seen over the last few seasons, commodity price and foreign exchange volatility is here to stay, so we want to do what we can to help our farmers manage this volatility,’’ he said.

A fixed base milk price may be suitable for those who want to take out price uncertainty, careful budgeters, and those looking to grow or expand and so need more price certainty.

‘‘This initiative also enables suppliers to lock in the price against their existing production curve — providing security for those producing the majority of their milk in the spring, as well as those who have a year-round supply pattern,’’ Mr Watt said.

Suppliers who are interested in learning more or participating in the initiative should contact their area manager.