Fonterra offers cash for clean farming

Fonterra farmers producing sustainable milk will be eligible for a new payment from next year.

From June 2021, the dairy co-op will pay up to 10 cents per kilogram of milk solids if the farm meets its onfarm sustainability and value targets.

In an email to farmers yesterday, chief executive Miles Hurrell said sustainability on-farm was a fundamental requirement for most of the co-op’s customers, who regularly checked up on progress.

‘‘Collectively these customers represent over $2 billion in revenue annually and it’s estimated that approximately $300 million could be at risk if we do not meet their expectations.

‘‘More and more we are seeing customers from across the globe requiring us to not only meet and improve upon their requirements, but also provide proof of completion,’’ he said.

‘‘The risk is that these customers will move to competitors if they can demonstrate better performance, or a substitute for non-dairy products with lower footprints’’

Hurrell said the total farmgate milk price would remain the same across the co-operative, but the amount each farm received would vary. In addition to the farm’s sustainability performance, variables like fat and protein in the milk would also affect the amount paid.

‘‘We’ve always paid our farmers based on the value that milk provides to the cooperative,’’ Hurrell said.

‘‘The reality is that the drivers of value are changing, and we need to reflect that.

‘‘Our customers want to know that the products they are buying are not only safe, but also produced sustainably.’’

Fonterra wanted to deliver on innovation, sustainability and efficiency that benefited its strategy and bottom line and a financial incentive for farmers to ‘‘go the extra mile’’ made sense, he said.

The cash payment will replace the Farm Source reward dollars farmers currently earn through the scheme and will work on a tiered system.