Fonterra delivers pricing innovation for farmers

Posted by Josette Dunn on 28th June 2010

Fonterra Australia has launched a new incentive payment which provides returns to all Victorian and Tasmanian suppliers, gives improved cash flow through the season and enhances the popular Seasonal Ratio Payment (SRP) with up-front payments.Fonterra’s National Milk Services Manager, Heather Stacy, said the new incentive, called SRP Plus, will be paid over and above the standard milk price and will mean more money for farmers, paid earlier in the season.

“We originally created SRP to reward suppliers who produced 40 per cent or more of their milk outside the traditional spring peak. More than 400 farmer suppliers in Victoria and Tasmania have been eligible for the $18 million Fonterra will deliver under SRP over the past two seasons,” said Ms Stacy.

“Our consultations with suppliers through the Bonlac Supply Company and the Fonterra Australia Supplier Forum highlighted that suppliers wanted access to the SRP funds earlier in the season to assist with cash flow and to remove the ‘all-or-nothing’ nature of the pricing.

“We have listened to the feedback from suppliers and introduced the new SRP Plus which provides incentive payments to suppliers who don’t qualify for SRP and also helps suppliers ‘bridge the gap’ to SRP.

“The new SRP Plus will complement the existing program and will be payable on qualifying milk produced outside the spring peak period, regardless of whether suppliers qualify for the SRP,” said Ms Stacy.

“We estimate SRP Plus will significantly increase the amount of extra incentives Fonterra pays out to suppliers, with all suppliers receiving a share.”

In addition to the new pricing incentive, Fonterra has written to farmer suppliers announcing it will introduce a new structured approach to pricing reviews and announcements in 2010/11.

“In the coming season, we will review milk pricing every two months commencing in late July. While price reviews will not necessarily lead to changes in pricing, if and when they do, any returns will be passed through to suppliers as soon as it is responsible to do so,” said Ms Stacy.

“This means suppliers will not have to wonder if and when any pricing announcements will take place during the year. There will be defined periods during which Fonterra makes pricing announcements.”