Fonterra unveils new farmer milk plan

Dairying in Georgia is usually more profitable than in New Zealand. Photo / File

Fonterra said it would introduce a pilot scheme aimed at providing more certainty for farmers over the price they are paid for their milk.

The pilot will mean farmers can choose to lock in a milk price announced at the beginning of a season for up to 75 per cent of their milk supply.

Fonterra said its "guaranteed milk price" (GMP) scheme would involve around 200 farmers throughout the country, at different stages of their farm operations and with varying herd sizes.

Fonterra's managing director of group optimisation and supply chain, Ian Palliser, said the past few years had confirmed that volatility in commodity prices was here to stay.

"And while most farmers can live with the market volatility, there are times when some farmers would prefer more certainty as it would help them manage their own farming businesses," Palliser said in a statement.

The scheme would also have benefits for Fonterra. "That's because we know what a certain proportion of our milk will cost us for the season and this in turn provides us with another selling tool when talking to our customers, some of whom are also looking for price certainty," he said.

Fonterra has been talking to farmers and the Shareholders' Council about the GMP concept.

The scheme will run over the next 2013/14 season.

Interested farmers will have a proportion of their production set at the opening milk price, which will be announced in May.

A break fee will apply for any farmer who decides to revert back to the normal milk price system during the season.