Fonterra's Expanded Fixed Price Milk Offering to Mitigate Farmers' Income Risk
Source: dairynews.today
Fonterra is set to expand its Fixed Milk Price service, providing New Zealand farmers with enhanced options to manage their income risk amidst fluctuating market conditions.
Fonterra, one of New Zealand's premier dairy cooperatives, has announced the expansion of its Fixed Milk Price (FMP) service, a decision aimed at mitigating income risks for farmers.
The FMP service, which was introduced in 2019, allows farmers to secure a fixed price for their milk, offering stability in an unpredictable market. The enhancements to the FMP service, set to debut at an event on June 9 and 10, 2025, include three key features: an option to fix a price in two seasons, a minimum or floor price lock-in, and a price range for the current season with both minimum and maximum limits. These new features are devised to provide more flexibility and reduce pricing volatility for farmers.
Fonterra's milk supply director, Lisa Payne, highlighted that the demand for the FMP service has been growing steadily. In the 2024-25 season alone, farmers fixed prices on over 120 million kg of milksolids.
The first event for the 2025-26 season saw 300 farmers lock in 15 million kg from a total offering of 20 million kg. The enhancements follow previous changes before the 2025 season, such as increased flexibility in over-subscribed events and a doubling of total offerings for the season to 150 million kg, representing 10% of Fonterra's total milk supply.
Payne stated, "Expanding our price risk management services also brings benefits to the whole co-operative," emphasizing that Fonterra's ability to lock in set prices aids in offering price risk management solutions to its key customers, enhancing overall earnings.
With 10 FMP monthly events each supply season, beginning in March, the prices are based on the average SGZ-NZX milk price futures contracts values, ensuring competitive offer prices.
Farmers can participate in these events according to their convenience, fixing the price of up to half their seasonal production. Fonterra's new minimum price option will also align with the Figured/StoneX Put Option product that has recently launched.
As Fonterra continues to innovate in its offerings, these strategic expansions present a significant opportunity for stakeholders to navigate economic uncertainties effectively, maintaining a secure position in the global dairy market.
The FMP service, which was introduced in 2019, allows farmers to secure a fixed price for their milk, offering stability in an unpredictable market. The enhancements to the FMP service, set to debut at an event on June 9 and 10, 2025, include three key features: an option to fix a price in two seasons, a minimum or floor price lock-in, and a price range for the current season with both minimum and maximum limits. These new features are devised to provide more flexibility and reduce pricing volatility for farmers.
Fonterra's milk supply director, Lisa Payne, highlighted that the demand for the FMP service has been growing steadily. In the 2024-25 season alone, farmers fixed prices on over 120 million kg of milksolids.
The first event for the 2025-26 season saw 300 farmers lock in 15 million kg from a total offering of 20 million kg. The enhancements follow previous changes before the 2025 season, such as increased flexibility in over-subscribed events and a doubling of total offerings for the season to 150 million kg, representing 10% of Fonterra's total milk supply.
Payne stated, "Expanding our price risk management services also brings benefits to the whole co-operative," emphasizing that Fonterra's ability to lock in set prices aids in offering price risk management solutions to its key customers, enhancing overall earnings.
With 10 FMP monthly events each supply season, beginning in March, the prices are based on the average SGZ-NZX milk price futures contracts values, ensuring competitive offer prices.
Farmers can participate in these events according to their convenience, fixing the price of up to half their seasonal production. Fonterra's new minimum price option will also align with the Figured/StoneX Put Option product that has recently launched.
As Fonterra continues to innovate in its offerings, these strategic expansions present a significant opportunity for stakeholders to navigate economic uncertainties effectively, maintaining a secure position in the global dairy market.
