FrieslandCampina organic milk price explained (2017)

Organic milk price

The annual milk price that FrieslandCampina pays the organic member dairy farmers comprises the organic 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 organic 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.

Organic guaranteed price

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

Every month, the organic guaranteed price is estimated based on the trend in the published milk prices of the benchmark companies. Any adjustment to the estimate of the organic 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 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

In 2017, 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.

Biodynamic milk premium

Dairy farmers supplying biodynamic milk are paid a premium on top of the organic guaranteed price. In 2017, the average premium for biodynamic milk will be 4.10 euros per 100 kilogrammes of milk. The biodynamic milk premium will be paid spread across the year in accordance with the table shown below.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Biodynamic premium per 100 kilogrammes of milk 6.00 5.50 4.00 2.00 2.00 2.00 2.00 5.00 5.00 5.00 5.50 6.00

Issue of fixed member bonds

The degree to which member bonds are issued 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 per cent 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.

Cash payment for organic milk

The cash payment for organic milk that the member farmers receive per 100 kilogrammes of milk is the organic guaranteed price calculated on the basis of the farm-specific protein, fat and lactose content less 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.

Settlement of seasonal scheme

The annual effect of the seasonal scheme on organic milk prices will be settled for the full calendar year with the organic milk price bill for the month of December of the calendar year in question.

Organic guaranteed prices come with their own arrangements for seasonal levies and supplements. In order to streamline the milk supply across the year, a levy is imposed in the spring and early summer; a supplement applies in late summer and winter. The following seasonal scheme will apply to 2017.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Supplement for 100 kilogrammes of milk 2.00 2.00 1.00 2.00 4.00 4.00 3.00
Levy per 100 kilogrammes of milk 1.00 2.00 4.00 5.00 4.00