The latest Advance Rate schedule can be viewed here.
What is the Advance Rate?
The Advance Rate is the percentage of the forecast Farmgate Milk Price paid on actual milk volume collected. The Advance Rate is based on the current forecast for the full year, and by paying a percentage of the current forecast, we reduce the risk that future advance payments will need to be decreased, or in extreme cases, returned to Fonterra if they were overpaid based on a higher previous forecast.
What are the benefits to Fonterra farmers and the Co-op?
The Advance Rate structure helps our Co-op pay our farmers as much of their milk cheque as possible while maintaining a healthy balance sheet where we have the necessary cashflow to operate day-to-day, meet our obligations to our banks and lenders, and pay our bills. If we did not have the Advance Rate, our Co-op would require more equity.
Maintaining a healthy balance sheet also helps our Co-op keep a strong credit rating which gives us access to a wider pool of lenders and lower interest rates. Our Co-op’s credit rating also influences the willingness of banks to lend to farmers and enables us to support farmers as we did in 2014 with the Co-op Support Loan.
For more information and a detailed overview of the Advance Rate and how it works, please visit our website.