How the Co-operative Difference Payment works

Fonterra introduced the Co-operative Difference Payment (CDP) in 2021. It introduced this because it believed that farms that sustainably produce higher quality milk help to increase the value of all the Co-operative’s milk. 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.

“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.

The Co-operative has introduced a new milk payment parameter to implement this payment. The parameter is used to value a particular farm’s milk to the Co-operative. This means each farm may be paid a different amount per milk solid relative to the Co-operative average.

At present the parameters include the fat and protein composition of the milk, and the volume. Going forward these parameters will include the achievement of Te Pūtake and Te Puku. The CDP will be made at the end of the year in the final retro payment.

How can you reach Te Pūtake? You will need to meet achievements in four focus areas:

1. Co-op 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 of four of the following key practices:
3. the farm’s purchased nitrogen surplus is at or lower than the target;
4. all on-farm plastics and unused agrichemicals are managed through an approved product stewardship scheme such as AgRecovery or Plasback;
5. there is no discharge of dairy shed effluent to water;
6. 80% farm-grown feed across the season.
7. Animals – have and implement an Animal Wellbeing Plan developed with and signed by your veterinarian addressing nutrition, health, environment and behaviour.
8. People and Community – you will need to complete all three sections of the DairyNZ Workplace 360 assessment and achieve 100% on the foundation level.

If you reach Te Pūtake you will receive 7 cents per kgMS.

For farms that meet Te Pūtake, the next step is Te Puku. To achieve Te Puku, you’ll need to achieve milk quality excellence on at least 30 days during the season. These do not need to be consecutive days. You’ll then receive an additional 3 cents for every kgMS supplied during the season that meets the excellence standard.

The amount and targets will be set annually by the Fonterra Board. The total amount available to be paid to Fonterra’s 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.