NEW ZEALAND – Fonterra, a New Zealand multinational dairy co-operative, has announced that it is introducing a Co-operative Difference Payment for farmers producing sustainable and high quality milk based on the Co-op’s on-farm sustainability and value targets.

Effective from next season, from 1 June 2021, Fonterra said that it will be paying farmers an additional payment of up to 10 cents per kilogram of milk solids (kgMS) if the farm meets the Co-op’s on-farm sustainability and value targets.

The dairy processor says that these are part of its strategy to add value to New Zealand milk and responds to increasing demand from customers seeking sustainably-produced dairy.

Fonterra CEO, Miles Hurrell, said that the additional payment will be funded out of the Farmgate Milk Price. However, Hurrell noted that the total Farmgate Milk Price will remain the same across the Co-operative.

Hurrell explained that 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.”

“We’ve always paid our farmers based on the value that milk provides to the Co-operative. 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.

Hurrell noted that the payment model will anable the co-operative meet the changing needs of our customers and strengthen the dairy processors market position as the consumer’s sustainable and nutritious dairy 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,” he said.

Last year Fonterra launched The Co-operative Difference – a straight-forward framework to help farmers produce high-quality, sustainable milk and prepare for any changes needed in the future.

Fonterra said that the new 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 programme, 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,” the dairy processor said in a statement.

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