Fonterra's scrapping a scheme launched last year for farmers that rewarded sustainable farmers with "savings and benefits" of up to 10c per kilogram of milk solids in favour of a new plan that offers instead hard cash of up to 10c per kilogram of milk solids.
The new payment scheme, from the start of June next year will be for farms producing 'sustainable, high quality' milk.
A year ago Fonterra launched The Co-operative Difference, described by Fonterra as "a straight-forward framework to help farmers produce high-quality, sustainable milk and prepare for any changes needed in the future".
Under the terms of the scheme then, the farmers were offered "savings and benefits" of up to 10c per kilogram of milk solids if they bought from Farm Source.
Fonterra chief executive Miles Hurrell says the new cash incentive will replace the "Farm Source Reward Dollars" farmers currently earn through The Co-operative Difference and will work on a tiered system.
"The more a farmer achieves in The Co-operative Difference programme, the higher the payment will be. The precise payment structure will be confirmed over the next few months following discussions with farmers but will be no more than 10 cents per kgMS," he says.
Hurrell said the new payment was part of the co-op’s strategy to add value to New Zealand milk "and responds to increasing demand from customers here and around the world for sustainably-produced dairy".
The payment will be funded out of the Farmgate Milk Price.
“The total Farmgate Milk Price will remain the same across the co-operative, but the amount that each individual farm is paid will vary depending on their contribution under The Co-operative Difference, in addition to the other variables, like fat and protein, which affect the amount that’s paid,” he said.
Hurrell said "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."