Fonterra runs an advance rate scheme to spread some of the risk from fluctuating global dairy prices across the year. Payments to farmers are based on the forecast milk price.
In recognition that cash is king and in line with their strategy, Fonterra has made the following changes to the scheme:
- The monthly payment date will move from the 20th of the month, to the 15th of the month.
- Final settlement payments will be settled as soon as possible after year end. The October retro payment will now be paid in full no later than five working days after the Annual Result, which is normally announced around 20th September. This is in addition to the usual September Retro payment which will be paid on the 15th of that month.
- The Advance Rate Board Guidelines are being simplified. They are moving to a single guideline for the Advance Rate which will start in July at 65% of the mid-range of the forecast Farmgate Milk Price range.
Changes to the advance rate come into effect from 1 June 2020 and are expected to help farmers manage their cashflow during the peak of their expenses.
With increased costs of feed driven by the drought, and the impact of the level four lockdown, which has impacted working arrangements and in some cases has increased the costs of services, these are likely to be welcome changes for farmers.
Further announcements about changes to its’ advance rate and incentive payments are expected from Fonterra before the start of the 2020/1 season.