Milk2

Including lactose in payout has no value impact

AbacusBio found that having a separate payment for lactose does not have a value impact and thus would not benefit the dairy industry.

Consultants from AbacusBio have been looking at different lactose payment scenarios while modelling the potential outcomes of separately paying for lactose.

AbacusBio works on a contract basis for New Zealand Animal Evaluation Limited which, under the umbrella of DairyNZ, is charged with managing the national herd breeding objective. 

"From this modelling we are able to estimate the value impact for the co-operative relative to the status quo payment system," Gareth Lash, Fonterra's commercial manager of milk supply, says.

While a farmer believes that it was disingenuous to recognise value created by adding lactose to milksolids and then not pay for different amounts of lactose in the milk farmers already supply, it was mentioned that the main reason was more to do with productivity, which was the outcome of different breed decisions.

"When assessing any change to milk payments one of the key criteria is that the change will result in increased value, or at a minimum, not reduce value to the co-op relative to the status quo," Gareth says.

Under the national breeding objective, where the aim was to identify the most efficient conversion of feed to profit, lactose was treated as having no value. 

Synlait was the only New Zealand dairy company to pay for lactose.

Supplied content from NZX Agri; Dairy Exporter (September issue)

Read the full NZ Dairy Exporter article