Fonterra has announced plans to pilot a scheme designed to provide farmers with the opportunity to have “more certainty” in their milk price.

The Guaranteed Milk Price (GMP) scheme will allow farmers to decide to lock in a milk price, announced at the beginning of the season, for up to 75% of their milk supply, the New Zealand farmer cooperative said today (30 April).

The company said the move comes in response to volatility in the commodities markets – a trend that the group believes is “here to stay”. It is designed to provide farmers with certainty that will give them the confidence to invest in their farms.

“Certainty can be particularly important for farmers at times when they are considering investing in new equipment, expanding or undertaking a new conversion. It’s a bit like having a fixed interest rate on your mortgage versus a floating rate. It enables you to know exactly where you stand with a percentage of your production and this can help with future planning,” MD of optimisation and supply chain, Ian Palliser, explained.

In addition, Palliser said the initiative would benefit Fonterra’s own financial planning – providing the company with a clear indication of how much it will be spending to secure a significant proportion of its milk supply.