Fonterra will be introducing a new model paying sustainable farmers more for their milk from next year.
From June 2021 farms that meet the co-op's on-farm sustainability and value targets will be paid up to 10 cents more per kilogram of milk solids (kgMS), the company announced on Tuesday.
"The total farmgate milk price will remain the same across the co-operative, but the amount that each individual farm is paid will vary depending on their contribution under the co-operative difference, in addition to the other variables, like fat and protein, which affect the amount that’s paid," said Miles Hurrell, Fonterra's chief executive.
"We’ve always paid our farmers based on the value that milk provides to the co-operative. The reality is that the drivers of value are changing, and we need to reflect that. Our customers want to know that the products they are buying are not only safe, but also produced sustainably."
Hurrell said payment will be given on a tiered system, with the precise structure to be confirmed over the coming months.