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.
The processor says its Fixed Base Milk Price initiative helps to assist farmers to budget, plan and manage profitability.
Similar to locking in part of your home mortgage at a fixed rate, the tool enables farmers to lock an agreed price for up to 70 per cent of their milk, before the season starts.
Fonterra Australia’s farm source general manager Matt Watt said Fixed Base Milk Price helped give suppliers greater certainty throughout the season by delivering a more stable income.
‘‘The season we’ve just had has further highlighted the impact that variable input costs, such as feed and water, can have on a farmer’s ability to plan,’’ he said.
‘‘Farmers have told us that they’re looking for flexible options that can help them to manage financial exposure, and that having price certainty from the beginning of the season will give them more confidence to invest in cost management opportunities, such as grain contracts.’’
Mr Watt said by coupling the Fixed Base Milk Price with other business management opportunities, suppliers could secure confidence in farm margins.
‘‘By tendering a portion of their annual milk production at a price that makes sense to their business bottom line, they can take some of the stress out of the season.
‘‘In addition to providing farmers with more price certainty, the Fixed Base Milk Price also provides Fonterra with certainty on the margins it can achieve on this milk.
‘‘With the Australian milk pool forecast to decline further, being able to provide our customers with greater certainty in terms of product volumes will help to translate to greater returns back to the farm gate — so that’s a win-win for everyone.’’
Applications are open until May 7 and are available to existing Fonterra farmers as well as prospective suppliers who want to supply Fonterra in the 2019-20 season.
The milk processor will announce the Fixed Base Milk Price after applications close. For the 2018-19 season, the Fixed Base Milk Price was $5.90/kg MS.