Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Fonterra Offers Guaranteed Milk Price Option After Pilot

1 April 2014
Fonterra Offers Guaranteed Milk Price Option After Successful Pilot
Fonterra farmers will be offered two opportunities to lock in the price paid for a percentage of their milk in the 2014/15 season.

A Guaranteed Milk Price (GMP) will be offered on 60 million kgMS in two tranches. Applications to supply 40 million kgMS will open in June, offering a 12 month GMP. In December, applications will open to supply 20 million kgMS with a six month GMP offered on production from December 1. Further details will be provided in May, including the process to set the GMP price and allocate volumes to farmers applying.

The Guaranteed Milk Price for the 2014/15 season follows a successful pilot involving 328 farmers who supplied 15 million kgMS for a guaranteed price of $7 per kgMS this season. The $7 price was based on the opening forecast for the season. The pilot attracted such a high level of support that applications were received to supply 37 million kgMS. Participants were scaled back to 40 per cent of their original application.

Chief Financial Officer Lukas Paravicini says the positive feedback from the pilot shows the GMP is seen as a useful tool for farmers to manage price volatility and secure income certainty. Having an opportunity to apply for the GMP in December meant farmers could follow the Farmgate Milk Price trend for the first half of the financial year before deciding on whether to lock down the price for some of their production in the second half.

“GMP has given them certainty around a proportion of their income for this season. Having certainty means they have been able to confidently make decisions around servicing debt or making capital investments on farm especially when prices are volatile and this certainty comes regardless of the final Milk Price. It is a useful risk management tool for farmers who want to take advantage of it. Some may want to use it every year, others when they want financial certainty to undertake major projects or negotiate debt.

“From the Co-operative’s perspective, the GMP also gives us certainty. We can lock in longer-term contracts with customers at a set price and attract a premium knowing there will be no risk with those contracts from price volatility. Having this capability enables us to build long-term and mutually beneficial relationships with our key customers.”

- ENDS -

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business:
NZ Puts Seven New Oil And Gas Areas Put Up For Tender

A total of seven new areas will be opened up to oil and gas exploration under its block offer tendering system, as the New Zealand government seeks to concentrate activity in a few strategically chosen areas. More>>

ALSO:

Half Full: Dairy Payouts Steady, Cash Will Be Tight

Industry body DairyNZ is advising farmers to focus on strong cashflow management as they look ahead to the 2015-16 season following Fonterra's half-year results announcement today. More>>

ALSO:

First Union: Cotton On Plans To Use “Tea Break” Law

“The Prime Minister reassured New Zealanders that ‘post the passing of this law, will you all of a sudden find thousands of workers who are denied having a tea break? The answer is absolutely not’... Cotton On is proposing to remove tea and meal breaks for workers in its safety sensitive distribution centre. How long before other major chains try and follow suit?” More>>

ALSO:

Scoop Business: NZ-Korea FTA Signed Amid Spying, Lost Sovereignty Claims

A long-awaited free trade agreement between New Zealand and South Korea has been signed in Seoul by Prime Minister John Key and the Korean president, Park Geun-hye. More>>

ALSO:

PM Visit: NZ And Viet Nam Agree Ambitious Trade Target

New Zealand and Viet Nam have agreed an ambitious target of doubling two-way goods and service trade to around $2.2 billion by 2020, Prime Minister John Key has announced. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news