Burra Foods is offering it suppliers the opportunity to lock in a percentage of their milk at a flat $6 a kilogram milk solids farmgate milk price for the next three years.
Chief executive officer Grant Crothers said the $6/kg MS was the fixed monthly price each supplier signing onto the deal would receive for that milk.
He said the offering was in response to farmer frustrations with volatile farmgate prices.
“The last 10 years has seen a significant increase in the volatility of dairy markets and the FMP (farmgate milk price), making dairying enterprises harder to manage,” he said.
“Locking in a percentage of milk production at a fixed price of $6/kg MS provides income stability and a hedge against future volatility on a pre-determined portion of milk.”
Mr Crothers said it was an important step to promoting confidence for growth and investment on the farm.
“Fixing a portion of income can only increase confidence and provides a tool for milk supply partners to better manage their business," he said.
"It is part of a solution to income volatility, a topic that keeps many dairyfarmers awake at night.”
Participation in the program is by application and farmers are to nominate the portion of milk solids they would like to ‘lock in’ during the three-year period, starting July 1.
Burra Foods expects strong interest in the program with applications closing on June 15.
Mr Crothers said analysts were currently predicting a price range for next season of $5.50 to $6.20/kg MS.
“Furthermore headline prices quoted by the media are often unachievable on a typical Gippsland supply curve,” he said.
“The option to lock in a portion of milk solids at $6/kg is not only at the high end of these headline price ranges, but is also a guarantee without vagaries – it is the price.
“This program, however, is not just about next year, it is fixing a price across the next three years.”
Mr Crothers said the fixed price was being offered to all Burra suppliers for a portion of their milk.
"If they cease to be a Burra supplier, then the hedge is forfeited," he said.
Mr Crothers said opening prices continue to be under review with an announcement expected shortly.