Consumers and customers want to know that their food choices support a sustainable future. The Co-operative Difference has been created by Fonterra to help farmers know what is expected of them, both today and in the future. It is a way of recognising and rewarding those farmers that produce high-quality milk in a more sustainable way. This is how Fonterra can remain globally competitive.

From June 2021, a portion of the milk payment is influenced by a supplier’s progress under Fonterra’s “next steps”. Suppliers can get up to 10 cents per kg of milk solids premium for their milk.

There are three levels of achievement.

1. Te Putake – The start of the journey focus is on looking after the people, animals, environment, and Co-op.

  • People – Complete Dairy NZ Workplace 360 assessment, achieving 100% on the foundation level. If they do not employ staff, then there is a smaller set of questions around farmers and visitors’ safety.
  • Animals – Must have Animal Wellbeing Plan developed with their veterinarian covering specific topics.
  • Environment – Must have a Farm Environment Plan in place with 3 out of 5 key practices being achieved.
  • Co-op – To achieve this, farmers need to keep full and accurate Farm Dairy Records and submit them online by 30 June each year.

Once achievements are gained in the focus areas, farmers will then receive 7 cents per kgMS on all milk supplied during the season.

2. Te Puku – The mid-point This is all about the quality of the milk supplied. Milk quality excellence must be achieved on at least 30 days during the season. Farmers will receive an additional 3 cents per kgMS on all milk supplied during the season.

3. Te Tihi – The summit This celebrates those suppliers that consistently deliver highest quality milk. To achieve Te Tihi, the milk supplied to Fonterra must be of an excellent standard for 90% of the days. There is no additional payment for this.

Accounting Treatment

This payment will be on the milk statement and will need to be treated the same as the rest of the milk payment. But we do need to be careful if completin budgets or tax forecasts for the year to find out if they are receiving this additional payment.From our experience, most farmers were last year still working towards getting these steps in place.The payment is made in the final retro payment for the season and would have been received in late September. As many farmers are still working their way through the requirements, the amount received by most farmers won’t have been significant.Other farmers have done their own cost benefit analysis and have decided that the additional 10 cents of the Co-operative Difference is not worth the effort, especially while the current Fonterra pay-out is looking to be $9.15 ($9.25 if the $0.10 premium is added). For many, an additional 1% payment isn’t worth the additional work.Although the Co-operative Difference payment of 10 cents isn’t significant, it opens the door for Fonterra to increase the amount in future as they look to actively encourage farmers to meet these targets.It will also depend on whether Fonterra can monetise this added value.