The Co-operative Difference Payment – What does this mean for my farm?

Now is a good time to get familiar with the new Co-operative Difference payment so you can make a plan on how to achieve the standards and receive the 10 cent payment.

From 1 June 2021 Fonterra is changing the way farmers are paid for their milk through the introduction of a new milk payment parameter called the Co-operative Difference. This will see a proportion of a farms milk payment influenced by the farms progress under the Co-operative Difference by up to 10 cents per KgMS. It is important to note that the 10 cents is included in the current milk price not on top of. So if the milk price is set at $7.60, you will receive $7.50 unless you reach the required standards under the Co-operative Difference milk parameters.

The regime is part of getting the best return for farmers and is determined by Fonterra’s ability to access opportunities and markets who demand good practices on farm in relation to animal wellbeing and guardianship of the land. This means staying at the forefront of issues such as quality, safety and sustainability – that is what the new Co-operative Difference is all about.

The Co-operative Difference payment is divided into 2 parts.
The first part (Te Putake) being the 7 cent standard which is based on four main areas of achievement which cover Environment, Animals, People, and Co-op & Prosperity. The second part (Te Tihi) is the 3 cent achievement which is based around milk quality. To access this payment you must have first past the achievements to receive the 7 cent payment.

The milk quality standard requires a farm to achieve milk quality excellence for at least 30 days. From that point onwards, ensuring you still maintain the milk quality excellence, you will get the 3 cents for milk supplied during this excellence period.

So where to from here for my farm?

The first step is to get the four achievements to access the 7 cent payment. These are listed below and give a brief outline of what they might look like to achieve. Further detailed information is provided in the official Fonterra documentation, and more information can be found here.

Achievements under Te Putake

1          Co-op and Prosperity
The requirement under this achievement is not a lot different to the current Dairy Diary. The big change here is it needs to be done online.

2            Animals
The requirement under this achievement is to have an Animal Wellbeing Plan signed off by your vet annually. This shouldn’t take longer than 15 minutes to complete and conveniently many vets already have a good template that covers the main areas.

  • Nutrition – Strategies to ensure cows reach body condition targets.
  • Health, mastitis, lameness, mortality and minimising antimicrobial resistance.
  • Environment – Planning for extreme weather events and development of management strategies for heat stress.
  • Behaviour – Discussion about current and future herd improvement strategies through genetics.

3            Environment
To pass the environment standard the farm must have a farm environment plan in place and be achieving 3 out of the 4 key practices (more on this below).

If your farm does not have a Farm Environment Plan completed, please ensure you are registered for one with your Area Manager. You will still need to meet three of the four key environmental practices areas:

            Environmental Practices;

  • Purchased Nitrogen surplus is at or lower than 138kg/N/ha – you will find this figure on your Fonterra Environment Reports
  • Participation in product stewardship scheme for on farm plastics and agri- chemicals – verification of this will be receipts. One of the approved schemes is Agrecovery 
  • No discharge of farm dairy effluent to water
  • 80% farm grown feed fed across the system

4            People and Community
To pass this achievement your farm is required to achieve 100% on the Dairy NZ Workplace 360 Assessment on the Foundation level. Many of the questions in the assessment cover items in relation to Health and Safety, Employee records timesheets, leave records and rosters. The farm must have evidence to support the answers submitted. The good news here is you can complete the test as many times as possible until you get 100%, and the test gives you examples of where you can improve and how you can achieve a pass (Dairy NZ Workplace360 Assessment).

The official verification of your achievement of the four achievements will be completed at your Farm Dairy Assessment.  You will need to give Fonterra no less than ten days’ notice prior to the Farm Dairy Assessment (you can do this through logging into your portal on the Farm Source website – the verification is the green circles on the Farm Source home page). QCONZ will be verifying documentation at the time of the assessment.

The payment for this milk will be paid with the Retrospective payments.

So where to from here?

  • Co-op & Prosperity  – Start doing dairy diary online from 1 June. It’s easier than paper, your Area Manager can help and provide training in this area.
  • Animal – Make a phone call to your Vet to get the Animal Wellbeing plan completed.
  • Environment Plan – this is something that the farm has to complete anyway
  • People – Achieve 100% in the Dairy NZ Workplace360 Assessment

One thing is for sure, change is constant in business and farming is no exception. The Co-operative Difference payment is an opportunity for Fonterra farmers to make steps towards what will eventually become compliance.

For some farmers there will be changes that need to be made to achieve some standards, in particular around the People and Community Standard. Achieving the 100% on the Foundation Level may require some changes or new procedures to be implemented with regard to Employees and Health and Safety.  

We are here to help you through this process. If you would like to come in and sit the test at our office, please get in touch. We can also help you to set up and manage your documents and systems to allow you to achieve the 100% pass.

For more information, contact Amy Coombes.

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