How is the milk price that FrieslandCampina pays its member dairy farmers annually for the milk they supply determined?

Learn more about the FrieslandCampina milk price
Discover more about: Guaranteed price
Discover more about: Nourishing by nature
Discover more about: Our heritage
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Guaranteed price

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. 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 implemented in a subsequent month.

More information on the guaranteed price
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Nourishing by nature

Nourishing by nature

Providing people around the world with the right nutrition is the challenge. Milk, by nature, contains essential nutrients such as proteins, vitamins B2 and B12, and minerals such as calcium. By offering trustworthy and tasty dairy products, FrieslandCampina is contributing towards safeguarding food and nutrient security. FrieslandCampina also strives to limit the pressure on natural sources and the environment.

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Our heritage

Our heritage

It all began in the 1871 when farmers join forces in local cooperative dairy factories all over the Netherlands. One of the reasons for doing so, was the lack of refrigeration. The farmers had to work together to deliver the milk quickly to their customers. Another reason to join forces was to gain more power in the market.

In late December 2008 FrieslandCampina is founded on two great Dutch dairy companies: Friesland Foods and Campina, which developed along similar lines in the 19th and 20th centuries.

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Milk price explained

The annual milk price that FrieslandCampina pays the member dairy farmers comprises the guaranteed price, the special supplements, the meadow milk premium, the performance premium (together the cash price) 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. The FrieslandCampina performance price comprises the milk price plus the interest on member bonds and the addition to the Company’s retained earnings. All amounts are exclusive of VAT.

In this short FrieslandCampina film we explain how the milk price is determined (including the monthly guaranteed price).

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 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 implemented in a subsequent month. 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 per cent protein, 4.41 per cent fat and 4.51 per cent 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 per cent 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 per cent 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

The outdoor grazing premium amounts to 1.00 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. Half of the outdoor grazing premium (0.50 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 via a cooperative scheme.

Partial outdoor grazing premium

The partial outdoor grazing premium amounts to 0.46 euros per 100 kilogrammes of milk. ‘Partial outdoor grazing’ refers to outdoor grazing of at least 25 per cent 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 2016 for supplies of raw milk for the Landliebe brand in Germany. The 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, 20 percent is paid to the member dairy farmers in the form of fixed member bonds. 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 member dairy farmers receive the milk price each month for the milk they supply. 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 plus the volume-based premium, less deductions for fixed costs and the cooperative schemes).

Settlement of seasonal supplements and levies

The annual effect of seasonal supplements and levies on milk prices will be settled for the full calendar year with the milk price bill for the month of December of the calendar year in question. The seasonal levy of 2.30 euros per 100 kilogrammes of milk applies from March to June. In the months from August to November, a seasonal supplement of 2.45 euros per 100 kilogrammes of milk is paid. No seasonal supplement or levy applies in the months of January, February, July or December.

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