fbpx
Print this page
Wednesday, 20 May 2020 09:55

Dairy farmers snap up fixed milk price options

Written by  Sudesh Kissun
Dairy farmers are seeking the safety of a fixed milk price as global economic uncertainty continues. Dairy farmers are seeking the safety of a fixed milk price as global economic uncertainty continues.

Dairy farmers are increasingly seeking the safety of a fixed milk price (FMP) as global economic uncertainty continues.

Fonterra says its FMP offer last month attracted a record oversubscription from farmer shareholders.

The co-op allocated 7.5 million kgMS to 756 farms at $6.42/kgMS in April: farmers had offered 57.8 million kgMS for contracts.

Fonterra says the significant oversubscription highlighted the benefits of the financial tool for farmers, particularly given the uncertainty around Covid-19, but has meant every farmer will only receive around 13% of what they applied for.
“We can only offer a certain amount based on our ability to offset this with forward contracts with customers. There will be more application windows each month up to December for the 2020-21 season,” it says.

The country’s second largest processor, Open Country Dairy (OCD), says it had an “overwhelming response” to its latest FMP contract offer.

OCD offered its third FMP for the 2020-21 season at $6.30/kgMS, the offer closing May 8.

While OCD hasn’t released details of its FMP uptake, chief executive Steve Koekemoer told suppliers in an email that the latest offer “has once again had an overwhelming response”. 

“We continue to work very hard to look for these opportunities to provide some price security to you,” he wrote in the company’s May newsletter to suppliers.

OCD is also working on a FMP trading platform to make the process easier for farmers.

“It will be introduced to all of you at the July round of meetings and we plan to have it fully operational later in the year,” Koekemoer says.

Fonterra, which runs a FMP contract every month, offered $5.97 for 12.5 million kgMS to its farmer suppliers this month. The co-op retains 10c/kgMS as a service fee.

In March, it allocated 5 million kgMS at $6.90/kgMS to 238 farms. It received applications for 15 million kgMS.

Fonterra was due to release details of its May uptake as Rural News went to print last week.

Financial tool

Fonterra says its fixed milk price (FMP) lets farmers:

• Fix part of their income at a set market-based milk price.

• Budget and forecast more accurately in a volatile milk price environment.

• Add a simple tool to their financial toolkit to use when it suits.

• Submit further applications to supply additional milk volume at a FMP as production changes and global prices shift during the season.

More like this

All eyes on NZ milk supply

All eyes are on milk production in New Zealand and its impact on global dairy prices in the coming months.

"Our" business?

OPINION: One particular bone the Hound has been gnawing on for years now is how the chattering classes want it both ways when it comes to the success of NZ's dairy industry.

Farmers' call

OPINION: Fonterra's $4.22 billion consumer business sale to Lactalis is ruffling a few feathers outside the dairy industry.

Wasted energy

OPINION: Finance Minister Nicola Willis could have saved her staff and MBIE time and effort over ‘buttergate’ recently by not playing politics with butter prices in the first place.

Featured

Australia develops first local mRNA FMD vaccine

Foot and Mouth Disease outbreaks could have a detrimental impact on any country's rural sector, as seen in the United Kingdom's 2000 outbreak that saw the compulsory slaughter of over six million animals.

NZ household food waste falls again

Kiwis are wasting less of their food than they were two years ago, and this has been enough to push New Zealand’s total household food waste bill lower, the 2025 Rabobank KiwiHarvest Food Waste survey has found.

Editorial: No joking matter

OPINION: Sir Lockwood Smith has clearly and succinctly defined what academic freedom is all about, the boundaries around it and the responsibility that goes with this privilege.

National

Machinery & Products

Tech might take time

Agritech Unleashed – a one-day event held recently at Mystery Creek, near Hamilton – focused on technology as an ‘enabler’…

John Deere acquires GUSS Automation

John Deere has announced the full acquisition of GUSS Automation, LLC, a globally recognised leader in supervised high-value crop autonomy,…

Fencing excellence celebrated

The Fencing Contractors Association of New Zealand (FCANZ) celebrated the best of the best at the 2025 Fencing Industry Awards,…