Fonterra has announced a massive increase in the price it will pay for organic milk, but will review the figure quarterly, despite stability in the sector for the past three years.
Like much of the developed world, New Zealand has a growing appetite for natural, wholesome food, and suddenly it seems dairy giant Fonterra has realised the value -- again.
From August 1, Fonterra will start paying $9.20 per kilogram of organic milk solids. That's more than double what it's offering for conventional supplies.
Paul Grave, Fonterra's head of cooperative affairs Waikato, says while it looks like a substantial increase it's on par with what the market is willing to pay.
"It is a big increase, but as I say, it's a market-driven price and it's a price that consumers are prepared to pay for organics at the moment."
It's a long-awaited and very welcome increase for the small number of farms already certified organic. But for those thinking of making the switch -- a process that takes three years -- there's no guarantee the same price will be on offer down the track.
Bill Quinn runs the Organic Dairy Hub -- established four years ago to offer organic farmers what they say is a fair price.
"A guarantee, a concrete floor of the $9.20 would be very useful in building confidence in the market," he says.
Greg Hill has been certified organic for six years. For five of them he was contracted to Fonterra and paid a very small premium for his milk.
Twelve months ago he switched to the hub -- a move worth more than $100,000.
"They [Fonterra] just didn't realise the value of organics, and that was one of the reasons I left for the hub too."
Now that Fonterra has finally come to the party, Mr Hill won't be switching back, but says he's pleased for other farmers thinking of converting to an organic farming practice.
"It's no secret the relationship between the organic industry and Fonterra has been strained for some years. So it's understandable many will be treating this seemingly generous offer with a degree of cynicism."
But there is hope that this time Fonterra is in it for the long haul.
Newshub.
