Communication to Fonterra farmers

24 April 2020


Communication to Fonterra farmers

The attached communication was provided to Fonterra Co-operative Group Limited farmers by the
Chairman, John Monaghan, on 24 April 2020.

-ENDS-.

For further information contact:

Fonterra Communications
24-hour media line
Phone: +64 21 507 072

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24 APRIL 2020
CHAIRMAN’S EMAIL: CHANGES TO THE ADVANCE RATE

Dear [name]
In-line with our strategy, we have been looking at improvements to the Advance Rate and
the potential for incentive payments linked to our Co-operative Difference programme.
We plan to make a series of announcements as part of this work before the start of the
2020/21 season, starting today with improvements to our Advance Rate.
From 1 June 2020 our Co-op is implementing three improvements to the Advance Rate that
will help to improve cashflow on farm and simplify the guidelines.
1. Bringing forward the monthly payment date: to the 15
th
of the month (currently the
20
th
).
2. Bringing forward final settlement payments: We want payments to farmers to be
settled as soon as possible after year end. The October retro payment will now be
paid in full no later than 5 working days after Annual Results. This is in addition to the
usual September Retro payment which will be paid on the 15
th
of that month.
3. Simplifying the Advance Rate Board Guidelines: We are moving to a single
guideline for the Advance Rate (irrespective of the opening forecast Farmgate Milk
Price range). The Advance rate will start in July at 65% of the mid-range of the
forecast Farmgate Milk Price range.
These changes mean that (using a $7.30 milk price as an example) by the end of January
an average 140,000 kgMS farm will have received $30,000 earlier than under the current
Advance Rate schedule.
In this same example, bringing forward the October retro payment means that this average
farm will receive their final payment of $50,000 approximately three weeks earlier.
These improvements have been managed without reducing the strength of our Co-op’s
balance sheet or having a negative impact on our credit rating.
You can read more details of these changes on Farm Source.
John.