Fonterra will penalise farmers from June 2018 for excessive use of palm kernel, which changes the fatty acid composition of milk.
In April this year the co-operative rolled out a fat evaluation index (FEI) nationwide after tests on 200 farms in conjunction with DairyNZ and AgResearch had confirmed the test was accurate.
Farmers, who have been receiving FEI results over the last few months, will have a year’s grace to adjust their farming systems.
Imported palm kernel (PKE) changes milk fat composition, causing problems in manufacturing and in meeting customers’ specifications. In 2015 Fonterra announced a voluntary guideline of a maximum of 3 kilograms per cow per day.
“In general, we know that in international markets we get a premium for our milk because of our pasture-based system. We see reduced PKE use as a positive step toward protecting that grass-fed reputation and our product integrity,” Miles Hurrell, group director co-operative affairs, said.
Federated Farmers dairy group chairman Andrew Hoggard said farmers should have time to adjust.
“They will be able to see when they push the system what will happen at different times of the year.”
The most obvious scenario that could cause a problem was summer drought.
“If that happens it might start to red line, so we might need more grass silage on hand. Some farmers might have to drop a few cows to make more silage.”
Hoggard said he used a blend of grain and PKE, and he had managed to keep within the FEI measure. The 3kg guideline was a reasonable rough estimate, but it depended on the breed of cow.
“For small dumpy cows it might be too much, but it will vary.”
A Fonterra spokesman said it preferred not to talk about specific amounts of PKE, but wanted farmers to focus on their results and adjust accordingly. Some farmers were able to feed their herds up to 5kg a day and remain within the limits, but others had problems feeding less than 3kg.
Since January the dairy giant had been carrying out tests at its manufacturing plants and assessing the FEI data.
“That information confirms that, at the levels recorded last season, there is a risk to our manufacturing capability and ability to meet customer specifications at certain stages of the season that needs to be addressed,” it said in a letter to farmers.
The grading system would be finalised by the end of December.
New Zealand’s largest farmer, Landcorp, has pledged to stop using PKE from the end of this month. Its present use is 10,700 tonnes, down from a high of 15,200 tonnes at the peak of the dairy boom in 2013-14.
New Zealand is the largest user of PKE, importing about a quarter of the world’s supply. Statistics NZ figures show imports peaked in the year to June 2015 at 1.94 million tonnes before falling to 1.86m/t in the year to June 2016.Besides claims that PKE helps fuel rainforest destruction in Indonesia and Malaysia, questions have also been raised about labour abuses and the use of child workers in palm oil plantations.