Fonterra introduced the Co-operative Difference Payment (CDP) in 2021. It introduced this because it believed that farms that sustainably produce higher quality milk help to increase the value of all the Co-operative’s milk. From 1 June 2021, up to 10 cents of each farm’s milk payment will be determined by the farm’s sustainability credentials and milk quality.
“The new payment recognises farmers who are already going above and beyond because they’ve innovated and invested early, and it also offers farmers more encouragement for taking the steps required to meet the changing expectations of customers and communities, both today and into the future” says Richard Allen, Group Director, Farm Source at Fonterra.
The Co-operative has introduced a new milk payment parameter to implement this payment. The parameter is used to value a particular farm’s milk to the Co-operative. This means each farm may be paid a different amount per milk solid relative to the Co-operative average.
At present the parameters include the fat and protein composition of the milk, and the volume. Going forward these parameters will include the achievement of Te Pūtake and Te Puku. The CDP will be made at the end of the year in the final retro payment.
How can you reach Te Pūtake? You will need to meet achievements in four focus areas:
If you reach Te Pūtake you will receive 7 cents per kgMS.
For farms that meet Te Pūtake, the next step is Te Puku. To achieve Te Puku, you’ll need to achieve milk quality excellence on at least 30 days during the season. These do not need to be consecutive days. You’ll then receive an additional 3 cents for every kgMS supplied during the season that meets the excellence standard.
The amount and targets will be set annually by the Fonterra Board. The total amount available to be paid to Fonterra’s farmers does not change, but a proportion of the Farmgate Milk Price will be available to be redistributed between farmers to better reflect individual farm’s achievement against the Co-operative Difference Framework.
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