A new Fonterra payment structure started last June. The co-operative has replaced peak notes with a capacity adjustment. Each shareholder can provide a certain volume of milk over the peak without having to pay a capacity adjustment. If a farmer supplies more than this volume, the farmer will pay a capacity charge. If less, farmers will receive a payment.

Fonterra has a default split for the capacity adjustment, so if the form did not indicate any percentage split, the payment or deduction is split according to the agreed sharemilking share.

Federated Farmers believes the default for the capacity adjustment should be 100 percent for the shareholder and zero percent for the sharemilker, as this relates to capital held, which is the responsibility of the shareholder. We also recommend that when parties are negotiating they set the capacity adjustment share at zero percent for the sharemilker.

If this was overlooked when filling out the change of sharemilking arrangement form, there is still time to change the split.

Shareholders will have recently received a change of payment direction form with the letter relating to the supply’s capacity adjustment debit or credit. Any changes must be received at Fonterra before February 21 2007.

This release is a joint statement on behalf of the sharemilkers and sharemilkers’ employers sections of Dairy Farmers of New Zealand, an industry group of Federated Farmers of New Zealand.

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