Trans Tasman dairy giant Fonterra is to change its payment system for dairy farmers to reflect the sustainability of their farming practices.
The company announced a new Cooperative Difference Payment of up to ten cents per kilogram of milk solids would be paid to farmers from June 1, 2021, replacing the current payments system.
As well as a payment for fat and protein, the ten cents will be available depending on farm sustainability in criteria such as safeguarding the climate, enhancing animal welfare and carefully managing water and the health of soils.
Fonterra, which produces dairy products in New Zealand and Australia under brands including Western Star, Perfect Italiano, Bega and Mainland quoted customer Nestlé on the need for sustainability of its brands.
Nestlé’s Robert Erhard said how milk was produced mattered to the company.
Nestlé is the largest food manufacturer in Australia.
Fonterra CEO Miles Hurrell said the drivers of value for customers was changing.
Hurrell said: “We need to reflect that.
“Our customers want to know that the products they are buying are not only safe, but also produced sustainably.”
Fonterra will not change the amount paid overall to its milk producers, with the new payment redistributing rewards based on the new criteria.
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