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Fonterra goes for simpler price structure

Fonterra Australia has announced a move towards a simpler milk pricing structure.

April 23, 2014 3:01am

Fonterra Australia has announced a move towards a simpler milk pricing structure.

Multiple seasonal tables will be reduced to one, the growth incentive will disappear and the money moved into the base price and the seasonal ratio payment will be removed.

The SRP was originally introduced in 2008 to reward farmers who supplied milk outside the spring peak.

Fonterra Australia managing director Judith Swales said they were responding to calls from farmers and the industry for a simpler milk price system for farm profitability and easier decision making on-farm.

‘‘We listened to that feedback and agreed we needed to actually do something to lead the industry forward,’’ Ms Swales said.

‘‘The new system is simpler, fairer, equitable, and more transparent. It will reduce the range of prices paid to farmers against the average and will help them understand the impact milk price and incentives have on their farm businesses so they can make more informed decisions on-farm.’’

Production payments will remain according to their current terms and the overall milk pool will stay the same, with additional investment being made into growth and cash flow.

Bonlac Supply Company chairman Tony Marwood said the new system would make it easier for farmers to understand their milk price and would assist them in making informed decisions.

The company used independent farm consultant John Mulvany, to develop the new approach.

‘‘My research confirmed that complexity in milk pricing doesn’t support good, profitable decision making on-farm,’’ Mr Mulvaney said.

‘‘Some farmers confuse a high cost of production with out-of-season milk, but some farmers simply produce milk at much lower costs than others.’’

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