FrieslandCampina organic milk price glossary 2017

Biodynamic milk

Milk produced in accordance with the organic and supplementary biodynamic production methods applying in the country in which the milk is produced, and that is qualified by the board as special milk.

Cash payment

A payment to a member dairy farmer consisting of the guaranteed price for milk supplied made in any month subject to settlement of deductions and premiums, such as fixed costs, reductions of the quality premium, any penalties based on the Practice Regulations, full and partial outdoor grazing premiums and deductions, Foqus planet premiums and deductions, and premium for special milk flows. The amounts are exclusive of VAT.

Cooperative schemes

The cooperative schemes involve a deduction of 0.35 euros per 100 kilogrammes of milk for partial financing of the outdoor grazing premium and financing of the partial outdoor grazing premium and of 0.25 euros per 100 kilogrammes of milk to finance the Foqus planet premiums. The deduction and payout for the outdoor grazing scheme takes place once a year in December. The deduction and premium payout for the Focus planet scheme will take place in April 2017, for the full calendar year of 2016.

Discounted price

The discounted price consists of the guaranteed price, the performance payment, the outdoor grazing premium and the special milk flows premium.

Fat price

The price of a kilogramme of fat. This price is used to calculate the milk price (together with the protein price and the lactose price). With effect from 2014, payments for milk will be based on its protein, fat and lactose content. The protein, fat and lactose content is shown in euros per 100 kilogrammes of milk and in a ratio of 10:5:1.

Fixed costs

Costs that are the same for each dairy business, such as payments for quality control and advice, Foqus Plant, milk account and accounting. The fixed costs for 2017 will amount to 1,200 euros annually, capped at 1 euro per 100 kilogrammes of milk, i.e. 100 euros per milk price bill.

Fixed member bonds (registered reserves)

The amount of the registered reserves depends on the results of FrieslandCampina and the retained earnings policy. Of the net profit of the business, based on the guaranteed price and net of the interest on member bonds, member certificates and profit attributable to participating interests, 10 per cent will be paid to the member dairy farmers in the form of fixed member bonds in the financial years 2017-2019. This amount will be distributed annually following the adoption of the financial statements, pro rata to the price of the milk supplied.

Guaranteed price

The guaranteed price is based on the average milk price for Germany, the milk price of Arla Foods in Denmark, the milk prices of Bel Leerdammer, Cono Kaasmakers and DOC Kaas in the Netherlands and the milk price of Milcobel in Belgium. These are the average annual prices, including payments in arrears and registered reserves. These prices for raw milk are representative for the country concerned. In order to calculate the FrieslandCampina guaranteed price, these milk prices are weighted for the volume of milk processed in the entire country in question. In total, this involves about 54 billion kilogrammes of milk. Each month, the guaranteed price consists of the expected guaranteed price in the relevant month and any settlement of differences in expectations from preceding months. The price is expressed in euros for 100 kilogrammes of milk with 3.47 per cent protein, 4.41 per cent fat and 4.51 per cent lactose, and is exclusive of VAT.

Lactose price

The price of a kilogramme of lactose. This price is used to calculate the milk price (together with the protein price and the fat price). The protein, fat and lactose content is shown in euros per 100 kilogrammes of milk and in a ratio of 10:5:1.

Milk price

The milk price that FrieslandCampina pays its member dairy farmers annually consists of the guaranteed price, the annual performance payment, the outdoor grazing premium, the special milk flows premium and the issue of fixed member bonds (registered reserves).

Organic milk

Milk produced in accordance with the organic production methods applying in the country in which the milk is produced, and that is qualified by the board as special milk.

Outdoor grazing premium

The outdoor grazing premium amounts to 1.50 euro per 100 kilogrammes of milk. The premium is paid if the dairy cows graze outdoors for at least six hours per day for at least 120 days per year. Of the outdoor grazing premium, 1.00 euros per 100 kilogrammes of milk is financed from the business, with the premium being partially recovered in the market through higher sales prices for milk products from cows that graze outdoors. The other 0.50 euros per 100 kilogrammes of milk is based on the reallocation of the milk price to the member dairy farmers through a deduction of 0.35 euros per 100 kilogrammes of milk.

Partial outdoor grazing premium

A premium of 0.46 euros per 100 kilogrammes of milk that can be earned if at least 25 per cent of the cattle present on a dairy farm graze outdoors for at least 120 days in each calendar year.

Performance payment

The amount of the performance payment depends on the financial results of FrieslandCampina and the retained earnings policy adopted. In the financial year 2017, FrieslandCampina will distribute 35 per cent of its net profit, based on the guaranteed price and net of the interest on member bonds, member certificates and profit attributable to participating interests, to its member dairy farmers in cash in the form of a performance payment. An interim payment can be made in September based on the results of the business and the volume of milk supplied. The interim payment amounts to 75 per cent of the pro forma performance payment for the first six months of the year. Final settlement will take place in April of the following year on the basis of the annual results of the business and the total volume of milk supplied.

Performance price

The amount in euros per 100 kilogrammes of milk, consisting of the milk price, the interest on member certificates, fixed member bonds and free member bonds, and the profit appropriated to the general reserve.

Protein price

The price of a kilogramme of protein. This price is used to calculate the milk price (together with the fat price and the lactose price). The protein, fat and lactose content is shown in euros per 100 kilogrammes of milk and in a ratio of 10:5:1.

Special milk

Cow’s milk qualified by the board as special milk on the grounds of Article 9.1 of the Articles of Association.

Special milk flows premium

A premium of 1.00 euro per 100 kilogrammes of milk will be paid in 2017 for supplies of raw milk for the Landliebe brand in Germany. The average premium for biodynamic milk is 4.10 euros per 100 kilogrammes of milk.