As Fonterra looks to expand its successful organic business, the Co-op has confirmed that from 1 June 2026 the conversion and utilisation incentives that are paid to farmers converting to organic will increase.
- Your Co-op
- Organics
Article
Organic conversion incentives set to increase
- Your Co-op
- Organics
7 Apr 2026
4 min read
It comes as DairyNZ has recently released three seasons worth of data from Fonterra farms across the North Island that highlight some of the benefits organic farming can deliver.
This industry data1, which is available via DairyBase2, indicates that when benchmarked alongside conventional farms, organic typically has:
- Higher profit per hectare and kgMS
- Lower expenses per hectare – with slightly higher labour costs being offset by savings on fertiliser and bought in feed
- Revenue per hectare that is on par or slightly lower.
Andrew Henderson, Fonterra’s General Manager Organic, says that for those interested in converting to organic it has the potential to unlock additional returns.
“Since the Organic Milk Price was introduced in the 2016/17 season it has delivered an average premium of $2.07 over the Farmgate Milk Price. The average premium over the last three years inclusive of the 2025/26 forecast is on track to exceed $3.00, driven by increasing demand and operational efficiencies in the programme,” says Andrew.
“There’s also the potential for lower input costs that are typical in New Zealand’s grass-fed organic systems.”
Farmers can access the DairyNZ DairyBase organic benchmark to explore what converting to organic could mean for their business.
How the conversion incentive works
Farms need to be fully converted to Fonterra Organic requirements to receive the Organic Milk Price, and this typically takes around three years.
During that time, the Co-op offers a support package designed to help farmers successfully transition – including a conversion incentive that’s paid over and above the conventional Farmgate Milk Price.
This conversion incentive for eligible farmers will increase on 1 June 2026 from 45 cents to 70 cents per kgMS.
Other support includes expert advice, networking opportunities and linking farmers up with peers who can mentor them through the process.
What’s on offer for certified organic suppliers
While it typically takes three years to become fully certified, certifications for a number of regions – including New Zealand, China, Europe, Korea and Taiwan – can be achieved after two and a half years. Once farms gain these certifications, they are then eligible for a utilisation incentive on top of the conventional Farmgate Milk Price and conversion incentive, given that the milk they supply can be utilised and sold as organic in those markets.
From 1 June 2026, the utilisation incentive will rise from 15 cents to 25 cents per kgMS. The increased incentives are to be funded through a mixture of the Organic Milk Price and additional investment through utilising a portion of the return that the Organic programme delivers to the Co-op.
The changes are designed to better support farmers through their conversion while also strengthening the long-term success of the organic programme, which not only covers its own cost but also makes a positive contribution to the wider Co-op’s earnings.
A bright future ahead
Fonterra’s organic business has been running since 2002 and currently includes more than 100 farms. Recruitment for more farms continues in the North Island and the Co-op is inviting applications in the South Island after the Co-op announced plans to start processing organic dairy products at its Stirling site, once milk becomes certified, from the 2028/29 season.
The decision to expand has been driven by increasing demand from customers around the world. Fonterra is well positioned to capitalise on that demand with the Co-op's diverse product range, broad market access and strong customer partnerships.
If you’re interested in switching to organic, call 0800 65 65 68, email specialty.milks@fonterra.com or get in touch with a member of the Farm Source team.
1. DairyBase data for 2022/23, 2023/24, 2024/25 – results are an average from the last three completed seasons, with benchmark represented by Fonterra supplying owner-operator conventional production farms in North Island.