Milk Price Methodology

The Farmgate Milk Price determines the amount paid for milk delivered to the farmgate by farmer shareholders.

Farmgate Milk Price Manual.

It is calculated in accordance with the Farmgate Milk Price Manual as follows.

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Fonterra's milk price methodology

The Commerce Commission carries out a Statutory Review of both the Milk Price Manual and the Milk Price Calculation annually.

For more information about the review process and for copies of the Commerce Commission’s reports, go to the Industry regulations page.

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How the Farmgate Milk Price is calculated.

Farmgate Milk Price is calculated by:

  • Determining the revenue that Fonterra would earn if the equivalent of all the milk Fonterra collects was converted into commodity specifications of whole milk powder (WMP) and skim milk powder (SMP), and their by-products which are buttermilk powder (BMP), butter and anhydrous milkfat (AMF). These are the products that currently make up the ‘Reference Commodity Products’. Prices largely reflect US dollar prices achieved on the twice-monthly GlobalDairyTrade (GDT) trading events, converted to New Zealand dollars using Fonterra’s actual average monthly foreign exchange conversion rate.
  • Deducting costs, including the cost of transporting raw milk to factories, and the cost of efficiently manufacturing Reference Commodity Products and then transporting them to the point of export from New Zealand, along with selling and administration expenses. They also include an amount for depreciation of fixed assets and an appropriate return on investment, including investment in working capital. To the extent feasible and where doing so is consistent with the Farmgate Milk Price Principles, costs are derived from Fonterra’s actual costs associated with these activities.
    The balance comprises the aggregate amount payable to farmer shareholders. This is an aggregate amount but is usually referred to on the basis of a Farmgate Milk Price per kgMS.

The Farmgate Milk Price methodology has been reviewed by competition experts Compass Lexecon, as described in the media release International Experts Endorse Fonterra Milk Price Formula.

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Milk Price statements

Version of 2017/18 Milk Price Model - SPREADSHEET,

Fonterra's Farmgate Milk Price statement 2018 - E-READER,

Fonterra's Farmgate Milk Price statement 2017 - E-READER, 334.0 kB

Version of 2016/17 Milk Price model - SPREADSHEET, 1.3 MB

Fonterra's Farmgate Milk Price statement 2016 - E-READER, 425.8 kB

Version of 2015/16 Milk Price model - SPREADSHEET, 1.4 MB

Fonterra's Farmgate Milk Price statement 2015 - E-READER, 392.1 kB

Version of the 2014/15 Milk Price model - SPREADSHEET, 1.4 MB

Fonterra's Farmgate Milk Price statement 2014 - PDF, 729.3 kB

Fonterra's Farmgate Milk Price statement 2013 - PDF, 4.9 MB

Fonterra's Farmgate Milk Price statement 2012 - PDF, 1.5 MB

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Milk Price manuals

Fonterra's Farmgate Milk Price manual 2018/19 - PDF, 573.5 kB

Fonterra's Farmgate Milk Price manual 2017/18 - PDF, 852.7 kB

Fonterra's Farmgate Milk Price manual 2016/17 - PDF, 530.9 kB

Fonterra's Farmgate Milk Price manual 2015/16 - PDF, 279.1 kB

Fonterra's Farmgate Milk Price manual 2014/15 - PDF, 810.2 kB

Fonterra's Farmgate Milk Price manual 2013/14 - PDF, 803.8 kB

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Other Milk Price documents

Milk Price panel terms of reference 2012 - PDF, 199.7 kB

The facts about Fonterra's Farmgate Milk Price - PDF, 137.7 kB

Compass Lexecon Milk Pricing review, 20 July 2011 - PDF, 390.5 kB

Milk - Pure and Simple - PDF, 172.3 kB

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Industry regulations

The Dairy Industry Restructuring Act 2001 (DIRA) enabled the creation of Fonterra in 2001.

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