Fonterra mulls options - sale or IPO
An outright sale of Fonterra’s global consumer business is more likely than a float, says Forsyth Barr senior analyst equities, Matt Montgomerie.
It enables the co-opeative to meet market regulations and the expectations of customers and consumers.
"When we get our milk quality right, we see improved quality, flavour, functionality, shelf life and yields.
"Low quality milk puts our reputation at risk, increases the risk of product quality failures and drives up the costs of transport and manufacturing."
From 1 June 2021, Fonterra changed the way farmers are paid for their milk through the introduction of a new milk payment parameter.
The 10 cent Co-operative Difference payment is made up of:
- 7 cents/kgMS for achievement under the Environment, Co-op & Prosperity, Animals, and People & Community focus areas.
Once these have been achieved:
- 3 cents/kgMS for milk that meets the 'Excellence' standard under the Milk Quality framework
The Milk Quakity standard is measured and graded when the tanker driver collects and tests the milk. The milk is graded as either a downgrade, quality, or excellence.
The excellence grade is awarded when the milk meets a higher level of quality, above Fonterra's milk parameters.
Once the farmer achieves an excellence grade of 30 days across the season, then every day they achieve that grade would see the farmer qualify for the 3c/kgMS payment.
Fonterra says the Co-operative Difference means pulling the best of what farmers do into five focus areas and making sure they become the strongest possible foundations for the co-op.
"It doesn't mean losing your unique way of doing things on your farm.
"Instead, it will help us all work together as a strong co-operative.
"Getting the best returns is determined by our ability to access opportunities, markets, and premium prices. It is also important that the wider community value our role and our approach to farming, animal wellbeing and guardianship of the land, so that dairy farming is seen as an attractive and respected career choice for future generations.
"This means staying at the forefront of issues such as quality, safety and sustainability.
"That is what The Co-operative Difference is all about."
Milk Cooling Regulations
New milk cooling regulations came into effect from June 1 2018.
The rules state that raw milk must:
a) be cooled to 10°C or below within four hours of the commencement of milking; and
b) be cooled to 6°C or below within the sooner of:
i) six hours from the commencement of milking, or
ii) two hours from the completion of milking; and
c) be held at or below 6°C without freezing until collection or the next milking; and
d) must not exceed 10°C during subsequent milkings.
The rules apply to all farms.
