Fonterra Change of Sharemilking Agreement

Fonterra, the world`s largest exporter of dairy products, recently announced changes to its sharemilking agreement, a move aimed at strengthening the financial and operational sustainability of the dairy industry.

Under the new agreement, Fonterra will offer a range of options for sharemilkers, including a flexible 50/50 sharemilking agreement, a variable rate agreement, and a lease agreement. The aim is to provide greater flexibility and certainty for farmers, while also reducing the risks associated with sharemilking.

For those unfamiliar with the term sharemilking, it refers to an arrangement in which a farm owner provides the land, cows and other resources, while a sharemilker provides the labour. The sharemilker is typically paid a percentage of the milk income, with the rest going to the farm owner.

The new sharemilking options announced by Fonterra are designed to provide greater choice, flexibility, and fairness for both farm owners and sharemilkers. Importantly, the new agreement also addresses some of the key issues that have been plaguing the industry in recent years, including low milk prices and high levels of debt among farmers.

One of the key benefits of the new agreement is that it allows sharemilkers to retain a greater share of the milk income. Under the existing agreement, sharemilkers typically receive around 30-35% of the milk income, with the rest going to the farm owner. This can make it difficult for sharemilkers to make a decent living and to invest in their own businesses.

Under the new agreement, sharemilkers will be able to negotiate a range of incentives, including bonuses for achieving production targets or for improving animal welfare. This should help to encourage greater productivity and innovation, while also providing a more equitable distribution of the milk income.

Another important benefit of the new agreement is that it provides greater certainty and stability for farmers. By offering a range of options, Fonterra is helping to reduce the risks associated with sharemilking, including market volatility and changing farm ownership. This should help to provide greater stability for farmers and sharemilkers alike, while also promoting a more sustainable and resilient dairy industry.

Overall, the changes to Fonterra`s sharemilking agreement are a positive step towards a more sustainable and equitable dairy industry. By offering greater flexibility and choice, Fonterra is helping to address some of the key challenges facing the industry, while also promoting innovation and productivity. If implemented effectively, the new agreement should help to ensure a brighter future for New Zealand`s dairy industry.

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