Fonterra’s FMP hits $9.60 as 500+ farmers lock in 2026 prices amid global volatility. Why this risk move matters.
EXECUTIVE SUMMARY: Fonterra’s April Fixed Milk Price (FMP) event saw record demand, with 547 farmers securing $9.60/kgMS for 2026 production—oversubscribed by 9.6%. This reflects heightened risk aversion as dairy markets face trade tensions, supply constraints, and China’s fluctuating demand. The FMP program not only stabilizes farmer income but fuels Fonterra’s B2B strategy by enabling fixed-price contracts for customers. New farmers and veterans alike leveraged the tool, signaling a shift toward proactive risk management. With global volatility persisting, Fonterra’s enhancements to FMP (like multi-year locks) aim to future-proof dairy businesses.
KEY TAKEAWAYS:
- $9.60/kgMS is a historic high, beating recent payouts and signaling farmer caution about future market drops.
- 10% oversubscription rule allowed full uptake of 27.4M kgMS, showing Fonterra’s adaptive risk strategy.
- FMP supports new farmers (high debt) and Fonterra’s B2B pivot by securing customer pricing deals.
- Global trade wars and supply crunches make price locks a survival tool, not just a perk.
- Fonterra plans FMP upgrades (floor prices, multi-year options) to stay ahead of third-party rivals.
More than 500 Fonterra farmers have grabbed a guaranteed $9.60/kg milk solids for portions of their 2026 season production in April’s Fixed Milk Price event, showing how hungry dairy producers are for income certainty in today’s rollercoaster market.
Fonterra’s April 7-8 Fixed Milk Price (FMP) offering attracted 547 farmers who collectively applied for 27.4 million kilograms of milk solids, blowing past the cooperative’s initial 25 million kg offering. Thanks to recently introduced flexibility rules allowing up to 10% oversubscription, Fonterra accepted all applications, marking a dramatic jump from March’s event, where about 300 farmers secured 15 million kg at $9.53.
“We’ve offered FMP contracts since 2019 because we know some of our farmers want the option of having greater certainty for a portion of their revenue,” said Lisa Payne, Fonterra’s milk supply director. “This includes farmers who are just starting, and in March and April, we’ve seen new farmers who will start supplying from June and utilizing the service.”
Why Farmers Are Flocking to Fixed Pricing
Let’s face it – the $9.60 price isn’t just good, it’s downright impressive. It comfortably beats Fonterra’s final Farmgate Milk Prices for recent seasons: $8.22/kg for 2022/23 and $7.83/kg for 2023/24. It even tops the record final price of $9.30/kg achieved in 2021/22.
Why wouldn’t farmers jump at this opportunity? After all, who doesn’t want to lock in a price already higher than most have seen in years?
This strong uptake suggests farmers view $9.60 as an attractive price point worth securing now, despite being nearly 14 months away from the start of the 2026 season (June 2025-May 2026).
The dramatic jump in participation between March and April—despite only a 7-cent price difference—shows this level may have crossed a psychological threshold for many producers, representing a value they consider highly attractive for future production.
How Fonterra’s FMP Program Works
Launched in 2019, Fonterra’s Fixed Milk Price program lets farmers lock in a predetermined price for up to 50% of their seasonal milk production. This creates a partial hedge against market volatility that’s become increasingly valuable in today’s rollercoaster economic climate.
The mechanics are straightforward: Fonterra announces monthly offering events with specific volumes and prices available. These prices reference the SGX-NZX milk price futures market, providing transparent market-based pricing following Global Dairy Trade auctions.
Farmers have a defined application window, typically 48 hours, to submit bids for the volume they wish to fix at the offered price. A service fee—typically 10 cents per kilogram of milk solids—comes off the offered price.
Benefits Beyond Price Certainty
For new entrants to the dairy industry, this certainty can be transformative. Early-career farmers typically operate with higher debt levels and tighter margins, challenging price volatility. The ability to lock in a portion of revenue provides crucial breathing room as they establish their operations.
“It’s great to be able to support the next generation of farmers who may require a greater level of certainty in their farm income,” Payne noted.
The program’s voluntary nature lets farmers customize their risk management approach based on individual circumstances. Some may choose to fix prices for the maximum allowable 50% of production, creating a significant income safety net, while others might participate more selectively.
Have you ever wondered how this might help your operation specifically? Think about those major purchases or investments you’ve been putting off due to market uncertainty. Couldn’t a guaranteed price for half your production make those decisions much easier?
Strategic Value for Fonterra
While the FMP program benefits participating farmers, it’s equally valuable to Fonterra’s broader business strategy. This dual benefit represents the cooperative model at its best—creating tools that serve individual members while strengthening the collective enterprise.
“It enables us to offer price risk management solutions to key customers that value price certainty for the products they source from us,” Payne explained. “The premiums we earn from those contracts flow through as improved earnings, which can then be returned to farmer shareholders as dividends.”
This capability directly supports Fonterra’s strategic pivot toward business-to-business operations, particularly in the Ingredients and Foodservice segments. The FMP program strengthens Fonterra’s competitive position in these core B2B markets by enabling differentiated price risk management offerings that many competitors can’t match.
Market Context Driving Demand for Certainty
The surging interest in Fonterra’s FMP program happens against a backdrop of heightened global economic uncertainty, making price certainty increasingly valuable to farmers and dairy customers.
Recent months have seen escalating trade tensions that threaten to disrupt global dairy markets. Tariff announcements from major economies have created significant market volatility, with the potential for tit-for-tat measures affecting established dairy trade flows.
Beyond trade tensions, dairy markets face persistent volatility driven by supply-demand imbalances and structural changes. Global milk production remains constrained in key exporting regions like the EU, New Zealand, and Australia due to environmental regulations, climate challenges, and declining dairy herds.
You’ve got to wonder – with all this uncertainty swirling around, isn’t locking in a solid price just smart business rather than gambling on what might happen?
Evolution of Risk Management Tools
Fonterra continues to evolve its approach to price risk management. Since launching in 2019, the program has seen steady refinement based on farmer feedback and changing market conditions.
Recent announcements indicate that Fonterra is developing expanded options, including multi-season price fixing, minimum price guarantees, and price collar mechanisms that would establish floor and ceiling prices. These enhancements would bring Fonterra’s offerings closer to the sophisticated risk management tools in other agricultural commodity markets.
The evolution toward more flexible offerings reflects growing farmer sophistication in financial risk management. Just as farmers utilize diversified approaches to weather risk, herd management, and input purchasing, they increasingly seek customizable approaches to milk price risk.
What This Means for Dairy’s Future
The overwhelming response to Fonterra’s April Fixed Milk Price offering at $9.60 per kilogram of milk solids reflects a dairy industry increasingly focused on managing risk in an uncertain world. The event demonstrates the growing importance of income certainty in farmers ‘ strategic planning, with 547 farmers scrambling to secure this price for portions of their future production.
For Fonterra, the program’s continued success validates its strategy of developing sophisticated risk management tools that benefit individual farmers and the cooperative. By allowing producers to lock in favorable prices while enabling Fonterra to offer similar certainty to key customers, the FMP program strengthens the entire value chain from farm to market.
As global market volatility persists amid trade tensions, supply constraints, and demand fluctuations, tools that provide stability will likely become increasingly valuable. Fonterra’s ongoing enhancements to the FMP program position it to meet this growing demand for certainty in uncertain times, supporting current farmers and the next generation of dairy producers navigating a complex global industry.
Isn’t it time we recognized that sophisticated risk management has become as fundamental to successful farming as pasture management or animal husbandry? In embracing these tools, New Zealand’s dairy farmers are adapting to the realities of a volatile global marketplace while maintaining their competitive edge in world dairy markets.
Learn more:
- New Zealand Milk Price Soars to $11.76 – The Shocking Truth Behind 2025’s Dairy Market Extremes
Explore why milk prices have skyrocketed, what’s driving the market, and how producers can navigate the risks and rewards. - Effective Risk Management Strategies for American Dairy Farmers
Get practical tips on managing milk price volatility, including tools and programs that help safeguard your dairy’s bottom line. - Fonterra’s Price Bombshell Reshapes Milk Markets – What Smart Farmers Are Doing Right Now
See how Fonterra’s latest price forecast is shaking up the global market and what proactive steps innovative farmers are taking.
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