Fonterra New Zealand will introduce a new financial tool to help farmers gain more certainty of what they will be paid for their milk for the season.
The new fixed milk price can help farmers with budgeting, planning, and managing on-farm profitability and joins a set of seven financial tools to assist them in sharing up and investing in their farms.
A Fonterra spokesperson explained how the new system would work.
‘‘New Zealand suppliers will be able to fix up to 50 per cent of their milk supply, up to five per cent of New Zealand’s total annual milk supplied at a fixed price,’’ he said.
‘‘The fixed price would be referenced to the NZ stock exchange Milk Futures Market.
‘‘Participating farmers will have 10 opportunities or ‘events’ throughout the year to lock in a fixed price for a portion of their milk supplied.
‘‘These events will be held after the first Global Dairy Trade event of the month (excluding January and February).
‘‘Fonterra will make 1 million kilogram of milk solids available at each event for its farmers.
‘‘If an event is over-subscribed, the amount will be pro-rated amongst interested farmers.
‘‘The cost of the service will be covered by a service fee of up to 10¢/kg MS.’’
Early in the new year, New Zealand farmers will get more information and training on how the events will work.
Fonterra Australia already has a similar tool, which lets farmers lock in a set price for up to 70 per cent of the season’s milk before the season starts.