Fonterra Co-Operative Difference Payment

In 2021, Fonterra introduced the Co-operative Difference Payment (CDP). From 1 June 2021, up to 10 cents of each farm’s milk payment will be determined by the farm’s sustainability credentials and milk quality. This payment was introduced as the Co-operative believes that farms that sustainably produce higher quality milk help to increase the value of all the Co-operative’s milk. The CDP is made at the end of the year in the final retro payment.

“The new payment recognises farmers who are already going above and beyond because they’ve innovated and invested early, and it also offers farmers more encouragement for taking the steps required to meet the changing expectations of customers and communities, both today and into the future” says Richard Allen, Group Director, Farm Source at Fonterra.

A new milk payment parameter has been created that is used to value each farm’s milk. This may mean each farm is paid a different amount per milk solid. Currently, the parameters include fat and protein composition, volume as well as achievement of Te Pūtake and Te Puku.

If you reach Te Pūtake you will receive 7 cents per kgMS. To achieve Te Pūtake, you’ll need to meet achievements in four focus areas:

  1. Co-operative and Prosperity – you need to keep full and accurate Farm Dairy Records and submit them by 30 June 2022
  2. Environment – you must have a Farm Environment Plan in place that focuses on the achievement of all good farming practices by 2025 and must be achieving at least three out of four of the following key practices:
    • the farm’s purchased nitrogen surplus is at or lower than the target;
    • all on-farm plastics and unused agrichemicals are managed through an approved product stewardship scheme such as AgRecovery or Plasback;
    • there is no discharge of dairy shed effluent to water;
    • 80% farm-grown feed across the season.
  3. Animals – have and implement an Animal Wellbeing Plan developed with and signed by your veterinarian addressing nutrition, health, environment and behaviour.
  4. People and Community – you will need to complete all three sections of the DairyNZ Workplace 360 assessment and achieve 100% on the foundation level.

For farms that meet Te Pūtake, the next step is Te Puku which is an additional 3 cents for every kgMS that meets the excellence standard. To achieve Te Puku, you’ll need to achieve milk quality excellence on a minimum of 30 days during the season (days need not be consecutive).

All amount and targets will be set annually by the Fonterra Board and current Farm Source Reward Dollars will be replaced with the Co-operative Difference Payment. However, the total amount available to be paid to Fonterra’s farmers will not change, a proportion of the Farmgate Milk Price will be available to be redistributed between farmers to better reflect individual farm’s achievement against the Co-operative Difference Framework.