Fonterra offers ecologically-linked payments to New Zealand suppliers

Within two months, Fonterra will reward its Kiwi farmers who meet sustainability and milk quality measures. But will they follow suit for their Australian suppliers?

Fonterra is set to offer ecologically-linked payments to its NZ suppliers. Picture: PETER HEMPHILL

FONTERRA is set to offer its New Zealand suppliers an ecologically-linked sweetener — but an equivalent Australian cash offer isn’t on the cards.

Within two months, the Auckland-based processor will reward its Kiwi farmers who meet sustainability and milk quality measures, with 10c of each farm’s milk payment a kilogram at stake.

Fonterra’s move follows on from similar schemes launched by smaller Kiwi rivals Synlait and Miraka who offer payments to suppliers who meet certain environmental benchmarks.

In its submission to the NZ Climate Change Commission’s draft report on reducing greenhouse gas emissions, Fonterra acknowledged its carbon footprint across the Tasman.

“We are deeply cognisant that our business produces 20 per cent of New Zealand’s greenhouse gas emissions,” the statement read.

The processor has come under pressure from the Ardern Government for its handling of run-off from farms as well as more direct factory matters.

In February, a Radio New Zealand investigation revealed Fonterra was using 16 empty farms to dispose of factory wastewater, and nitrates had leached into nearby water supplies.

A Fonterra Australia spokeswoman said: “On the NZ sustainability payment, we don’t have any immediate plans to bring this initiative into Australia, but we’re always looking at ways we can work with our farmers to improve sustainability on-farm so it’s something we may look into down the track.”

Following the publication of the original article, a Fonterra Australia spokeswoman said:

“It’s important to note that NZ farmers don’t receive an extra 10c on top of the milk price. The total amount available to be paid to farmers does not change, but 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.

“To get the 7c/kg MS, NZ farmers need to achieve a range of sustainability benchmarks, such as having an environmental plan in place, no effluent discharge into waterways, achieve nitrate levels, a recycling program and animal welfare requirements. These are requirements that our Australian farmers do not currently have to meet.

“Once these targets have been achieved, 3c/kg MS may be paid for achieving certain milk quality standards. Note that Fonterra’s Australian farmers are currently rewarded through a milk quality payment for meeting our milk quality standards.

“To put it simply, the Co-operative Difference payment rewards NZ farmer shareholders who have put in the extra effort to go above and beyond meeting sustainability targets, while encouraging all farmers to improve sustainability on farm.

“Farming practices are quite different in NZ compared to Australia. To introduce a similar payment in Australia would mean that more onerous requirements are placed on Fonterra suppliers, compared to farmers who supply other processors.”

The eco-payment move comes as Fonterra confirmed in its latest Global Dairy Update that its milk collection figures for New Zealand and Australia were travelling in different directions.

Fonterra’s NZ milk collection was up 2.3 per cent in February 2021 compared to February 2020 while its Australian collection figure was 5.8 per cent down during the same time frame.

“Lower herd numbers with increased consumption of lower quality home-grown fodder instead of supplementary feed are continuing to impact milk production growth across Australia,” the update stated.

Season to date collections by Fonterra Australia are also down 1.8 per cent on last year.

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