#TGD: Guaranteed milk price offers certainty

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Taranaki farmers say Fonterra’s new guaranteed milk price scheme will offer certainty to those who need it in their business.
The dairy co-operative is piloting a scheme that will let farmers lock in the milk price announced at the start of next season for up to 75 per cent of their milk supply.
Kapuni farmer Steve Poole said the scheme could suit people who wanted certainty around their budgeting, or who couldn’t afford for the milk price to fall below a certain level. It was likely to appeal to risk-averse farmers.
Poole, who has a herd of 800 cows on his 210ha farm and runoff, said he didn’t think he would sign up.
«The scheme would take the gamble out of what you’re doing for the season. It’s still a gamble – especially if the price goes up, but it would give you absolute certainty.
«We’ve all learned to deal with the volatility of the milk price. We accept it and we plan accordingly.»
Hannah Topless, of Stratford, who was 2010 Taranaki Sharemilker of the Year with husband Greg, liked the sound of the scheme and will watch the pilot with interest. «If you’re looking at a new situation, you can take firm figures with you to the bank.»
She thought it might appeal to farmers who bought large quantities of feed.
Inglewood sharemilker and 2009 Taranaki Sharemilker of the Year Paul Davidson said some farmers might like the scheme because it would give them certainty.
But there were unanswered questions around it. He wondered how the difference would be funded if the milk price dropped.
«Who will pay the farmers who have the contract for the higher price? Does the company take it from the suppliers’ kitty?»
Conversely, he also wanted to know what would happen to the surplus if the milk price rose because the farmers with the guaranteed price wouldn’t receive it.
«Does the company bank the extra revenue?»
He said farmers could control only what happened on the farm, but he and wife Lorette would not join the scheme. «As sharemilkers, we want to ride the highs and that’s how we structure our business.»
He thought conservative farmers might use it.
The scheme has the support of the Fonterra Shareholders Council.
Egmont Village farmer and shareholders’ councillor Kevin Turnbull said there would be no cross subsidies of farmers who chose to take part in the scheme because the company would sell the milk they produced at a fixed price.
The scheme was exactly like fixing or floating mortgage rates.
«Some farmers will use it and some won’t. It’s another avenue to give farmers more scope and more options to manage the volatility of the milk price. That’s one of the beauties of being part of a co-operative.»


BDO rural commentator Mark Irving, of New Plymouth, said a guaranteed milk price would remove a variable for farmers.
«Farmers lock in the milk price, they know what their costs are, so the only variable they’re left with is the weather.»
Those who signed up would probably expect a premium, he said.
Fonterra’s Ian Palliser said volatility in commodity prices was permanent. «While most farmers can live with market volatility, there are times when some farmers would prefer more certainty.»
Farmers investing in new equipment, expanding or undertaking a farm conversion liked certainty.
«It’s a bit like having a fixed interest rate on your mortgage versus a floating rate. It enables you to know exactly where you stand with a percentage of your production and this can help with future planning.»
Mr Palliser said the scheme had benefits for Fonterra, which would know the costs of a proportion of its milk, providing it with another selling tool for customers seeking price certainty.
A break fee would apply to farmers who reverted to the normal milk price system during the season.
Ideally, about 200 farmers throughout the country, at different stages of their farm operations and with varying herd sizes, would participate in the pilot, he said.
 
Source:  Stuff

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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