Fonterra Australia has offered farmers chance to set monthly maximum and minimum prices for an agreed volume of milk solids. The new tool, the Milk Price Range, could see farmers lock in prices for as much as 70 per cent of their production.
Milk Price Range
Prices are allocated following a market-based tender process of allocation. Fonterra Australia says this provides security, while still allowing farmers exposure to market upside. Matt Watt, national milk supply manager, said: “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.” He said farmers will be able to plan, budget and manage farms accordingly.
Key benefits
After a successful pilot last year, the Milk Price Range shall go across all suppliers, adding to other price risk management tools. Tony Marwood, chairman of Bonlac Supply Company, which developed the Milk Price Range with Fonterra, said: “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.”
Tendering opened last month, with successful applicants hearing on Friday. Suppliers are urged to talk with their area manager to determine if the initiative suits their operation.
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