What will change at FrieslandCampina?

Invitations for the member meetings at FrieslandCampina will be sent out on the last Thursday of September (Thursday, September 27). Discussions will then begin about the amended proposals, but the proposals will only become active once the Members' Council has agreed. If that happens, the proposals will apply from January 1, 2019. However, there is one part that has been postponed anyway: the basic dairy correction. 

Performance bonus
What does not change is the purchase and delivery obligation. In addition, each member continues to receive the guaranteed price and performance bonus. In the past, the performance bonus mainly reflected profits on baby food and other high-margin products. In the future, however, the performance bonus must also reflect the profit on special milk flows, including the proposed Top Line.

What does change, on the other hand, is that the cooperative will no longer pay the guaranteed price indefinitely for every liter of milk delivered. This concerns the discount of €0,10. For the years 2019 and 2020, market-based growth has been set at 1,5%. The cooperative will determine growth for 2021 and 2022 in 2019.

The individual quota was determined on the basis of various criteria. The 2017 reference turned out to be the most favorable for most dairy farmers and for others the 2015 comparison volume was added later. The so-called 'option 6' turned out to be particularly relevant for those who have not achieved higher milk production since 2015, did not adjust their livestock, but did purchase rights. 

In addition, there are 3 other references, namely April 17, 2016 to April 16, 2017, the average from April 17, 2015 to April 16, 2018 and the period April 17, 2017 to April 16, 2018. 

Is the discount necessary?
Only when the milk pool (in terms of size) exceeds the reference will the discount apply to dairy farmers who supplied more milk than their own quota allows. And from 2019 onwards, the collective offer will become visible (via Melkweb). Before the settlement, a positive correction is made if companies have stopped or left.    

How exactly does it work? If a dairy farmer stops or switches to another processor, the liters benefit the collective. There is also latent space (if the quota is not used). Every six months, the extra space becomes final before the €0,10 discount is implemented (if necessary). "So every grower gets an equal share."

There is a shortcut. That is entering into a partnership with a company. After 5 years, one member can take over the milk from the other. If these measures are not in place, there is a fear of an influx of extra milk.

A settlement every six months
The deduction is settled every six months, through the interim payment and the performance bonus. "The settlement can never be higher than the surcharge," says FrieslandCampina. If it turns out at the end of the year that the performance bonus is insufficient to offset the levy, this will be done via the milk money (maximum 25% of the milk money).

One question emerging in the field is: is it really necessary? However, Jeroen Elfers, director of cooperative affairs at FrieslandCampina, and Frans Keurentjes, chairman of the cooperative, leave no doubt about this. "We know through the phosphate guide that there is still a lot of room within the rights and possibilities to supply more milk." The dairy cooperative does not say how much milk is involved.

And after 2024?
The rules will be slightly different after 2024, in particular the withholding of €0,10 will be slightly different. From that moment on, the average volume of the past 5 years is used. If this is higher than the reference (a sum of the individual volume plus the market-based growth and allocated latent space), there is collectively too much milk and the own volume is exceeded, then a deduction only applies for the liters above 5 -annual average. However, the difference is settled collectively. This makes the volume of the previous 5 years the new 'quota'. 

What else is changing?
In addition, FrieslandCampina is also introducing milk money regulations (also for organic dairy farmers). Additional requirements will also apply to organic dairy farmers, which are aimed at the conditions that China imposes on organic milk (China Organic Standard). For example, livestock may only be purchased from other organic farms. The additional requirements of the De Natuurweide foundation will also apply. 

In Germany, a step is also being taken to reduce the number of special milk flows; this makes VLOG milk a requirement. This is being worked on in the Netherlands the Topline Dairy. It also becomes more attractive to participate in special milk flows, because this creates opportunities for growth without discounts. For example, if there is more demand than supply, it will be examined whether other members want to participate in, for example, 'North Holland milk'. If there is no interest, existing suppliers will receive an additional quota of at least 1 year.

For members who do not participate in the special milk flows, these can generate a profit through the performance bonus. All in all, growth in the future must be more in balance with value creation. Does this encourage laziness? “No,” the men say. "Everyone here is very motivated to achieve the best results."