Fonterra has made some changes to their payout profile for the 2021/22 season. The two key changes are the removal of the capacity adjustment and the introduction of the Co-operative Difference Payment.
The Co-operative Difference is a framework focusing on on-farm practices which support the achievement of Fonterra’s strategy. For 2021/22, the Co-operative Difference Payment is 10 cents per kgMS. The Co-Operative Difference includes 7 cents per kgMS for achievement in the four focus areas of Co-op and Prosperity, Environment, Animals, and People and Community and an additional 3 cents per kgMS for Milk Quality Excellence. More information can be found here or talk to your local Fonterra rep.
Fonterra recently announced a strong opening payout for the 2021/22 season with a midpoint of $8.00 per kgMS. The current forecast for the 2020/21 season is $7.55 per kgMS. These strong payouts are providing good cashflow results and in many cases significantly increased tax positions.
From a tax and cashflow point of view, the payout profile is as follows:
*These are derived from the base advance rate plus the capacity adjustment and will vary slightly across farms.
As the above table illustrates, the payout profile by tax year has been improving over the last few years. As a result of these stronger payouts, many clients have been paying provisional tax and making voluntary payments. We encourage you to get your records in early if you are expecting a large profit in the 2021 year so that we can review your tax position and work through the options if there is a shortfall in your provisional tax payments.