The annual milk price that FrieslandCampina pays the member dairy farmers comprises the guaranteed price, the annual performance payment, the outdoor grazing premium, the special milk flows premium and the distribution of member bonds (registered reserves). The price paid for milk is based on the value of the supplied kilograms of protein, fat and lactose in the ratio 10:5:1. All amounts are exclusive of VAT.

Guaranteed price

The guaranteed price is the amount per 100 kilogrammes of milk that FrieslandCampina is guaranteed to pay to its member dairy farmers monthly. The guaranteed price corresponds with the average annual prices for raw milk, including premiums, charges, payments in arrears and any registered reserves of the benchmark companies in Germany, Denmark, the Netherlands and Belgium.

Every month, the guaranteed price is estimated based on the trend in the published milk prices of the benchmark companies. Any adjustment to the estimate of the milk prices can be incorporated into the guaranteed price in subsequent months. Any annual adjustment of the guaranteed price can be settled at the same time as the annual payment of the performance payment. The guaranteed price applies per 100 kilogrammes of milk, with 3.47 percent protein, 4.41 percent fat and 4.51 percent lactose.

Performance payment

The amount of the performance payment depends on the financial results of FrieslandCampina and the retained earnings policy adopted. 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, 35 percent is paid to the member dairy farmers in the form of a performance payment. The performance payment is distributed annually, once the financial statements have been adopted, pro rata to the price of the milk supplied (kilogrammes of protein, fat and lactose). The performance payment is calculated based on the price of the milk supplied in the previous financial year.

Interim payment

An interim payment can be made in September on the basis of the results of the business and the volume of milk supplied. The interim payment amounts to 75 percent of the pro forma performance premium for the first six months of the year. The final settlement takes place in April of the following year, on the basis of the annual results of the business and the total volume of milk supplied.

Outdoor grazing premium

In 2018, the outdoor grazing premium will be 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 will be 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 via a cooperative scheme.

Partial outdoor grazing premium

In 2018, the partial outdoor grazing premium will be 0.46 euros per 100 kilogrammes of milk. ‘Partial outdoor grazing’ refers to outdoor grazing of at least 25 percent of the dairy cows on a dairy farm for at least 120 days per year.

Premium for special milk flows

A premium of 1.00 euro per 100 kilogrammes of milk will be paid in 2018 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.

Issue of fixed member bonds

Every year, fixed member bonds are issued to the members (registered reserves) from the financial results of the business. The amount that is distributed on fixed member bonds depends on the financial results achieved by FrieslandCampina and the retained earnings policy adopted. 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 percent will be paid to the member dairy farmers in the form of fixed member bonds in the financial years 2017-2019. The member bonds are calculated based on the price of the milk supplied in the previous financial year. No account is taken of cooperative schemes, such as the seasonal scheme and the volume-based premium.

Milk price

The milk price that the member farmers receive per 100 kilogrammes of milk is the guaranteed price calculated on the basis of the farm-specific protein, fat and lactose content fewer deductions for fixed costs and the cooperative schemes), plus – where appropriate – full and partial outdoor grazing premium, Foqus planet premium and premium for special milk flows. Any reductions of the quality premium and any penalties based on the Practice Regulations are settled monthly. The amounts are exclusive of VAT.

For more information, please refer to the glossary, or the recent news items about the guaranteed price.