New Zealand dairy giant Fonterra is making changes to how it pays its farmgate milk price. From June 2021, Fonterra said it will link 0.6c/l of its milk price payout to on-farm sustainability targets.

However, the farmer-owned co-op said the payment will be funded out of the existing pot of money used to pay the farmgate milk price, meaning the sustainability payment will not come from an additional pot of money. In essence, farmers will receive a reduced milk price if they do not participate in the sustainability programme.

Fonterra said the more a farmer achieves on their farm in terms of sustainability goals, the higher the sustainability payment will be. The precise payment structure is yet to be confirmed, but will be no more than NZ$10c/kg of milk solids (0.6c/l).

Fonterra CEO Miles Hurrell said the co-op would pay out roughly the same amount of money in milk price as other years, but added that the final milk price farmers receive will differ depending on what changes they make in how they farm.