Fonterra Australia has added another tool to its Price Risk Management program for its suppliers.
Following a successful pilot program last season, Milk Price Range is now being rolled out across Fonterra’s Australian supplier base.
Building on Fonterra’s other Price Risk Management tools such as Fixed Based Milk Price, also launched last season, Milk Price Range allows suppliers to set monthly minimum and maximum range prices for a certain volume of their milk solids in a season.
Milk Price Range will help suppliers in running their farming businesses by providing greater certainty around income and profit margins.
“The advantage of Milk Price Range is that it gives suppliers greater certainty throughout the season for their milk price, and therefore margins and growth plans,” said Fonterra Australia national milk supply manager Matt Watt.
“Farmers will know well before the season starts what they’ll be receiving for a volume of their milk, and they’ll be less exposed to volatility through the season. This will give our farmers an increased ability to plan ahead, budget, and manage their farms.”
How it works
Milk Price Range will let successful applicants lock in the minimum and maximum monthly price for between 10 and 70 per cent of their expected milk solids for the season.
Milk Price Range provides farmers with greater security because a fixed volume of their monthly milk solids will receive a minimum price, while still being exposed to some market upside.
Milk Price Range will be allocated to eligible suppliers in a market-based tender process, ensuring fairness for all suppliers.
Bonlac Supply Company (BSC) chairman Tony Marwood said the BSC board and supplier forum had worked closely with Fonterra to ensure Milk Price Range would deliver the benefits that farmers need.
“Key benefits for farmers include the ability to better manage margins by knowing their milk price with greater certainty, while still allowing for the benefit of some market improvement, and greater confidence for lenders, assisting famers to manage debt and plan for the future,” Mr Marwood said.
The tender period opens to Fonterra suppliers this Friday, (April 17) with applications closing April 30, ahead of the Milk Price Range announcement on May 8, when successful applicants will also be notified.
Mr Watt said New Zealand farmers had been using Price Risk Management tools for many years, and the Fonterra's Australian operations were pleased to be able to leverage these successful programs and offer them to our local supplier base.
“We’re committed to maximising the profitability of our suppliers, and Milk Price Range is just one of the ways we’re helping them to do that.”
Details: Fonterra suppliers interested in participating should contact their area manager.