Here you’ll find an explanation of how Advance Rates work, why they’re used, and where to access the latest rates and related information.
Summary:
The Advance Rate is the percentage of the forecast Farmgate Milk Price paid on actual milk volumes collected each month.
What does the Advance Rate do?
The Advance Rate is the percentage of the forecast Farmgate Milk Price paid on actual milk volumes collected each month. The Advance Rate is based on the current forecast for the full year, and by only paying a percentage of the current forecast throughout the year, 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).
It’s important to remember that the Advance Rate does not mean Fonterra is holding onto unpaid milk payments for free, as there is a charge in the Milk Price Manual calculation to compensate for this.
Further information
The structure we put around the Advance Rate is a balance of getting farmers as much of their milk payment as early as possible, while also giving consideration to things like maintaining a healthy balance sheet for the Co-op. We need to 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.
Paying progressively over the season and finalising the Farmgate Milk Price after the end of the season is an important part of our capital and funding structure. Retaining part of the forecast milk payment until the end of the season provides capacity for the Board to adjust the Farmgate Milk Price if it determines it needs to do so to support the financial strength of our Co-operative. The Farmgate Milk Price is finalised in September after the end of the season.
We’re continuing to optimise our Advance Rate Schedule to support on-farm cashflows, as was done in late 2025 to minimise the impact of a softening Farmgate Milk Price.
In 2024/25, the strength of our balance sheet enabled us to increase advance payments over the course of the season, with the July retro payment increasing to 90%.
In May 2023 we announced a change to the Advance Rate schedule that saw an increase in the opening Advance Rate for the 2023/24 season from 65% to 75%.
Meanwhile back in 2020, we implemented three improvements to the Advance Rate. This included bringing forward the monthly payment date, bringing forward the final settlement payments and making the Advance Rate Board Guidelines simpler.
See below for the current Advance Rate payment schedule guideline.
| Payment Month | Advance Rate Percentage Rate (Guidance) |
| July | 75% |
| August | 75% |
| September | 76% |
| October | 78% |
| November | 80% |
| December | 82% |
| January | 85% |
| February | 85% |
| March | 85% |
| April | 85% |
| May | 85% |
| June | 85% |
| July | 85% |
| August | 92.5% |
| September | 97.5% |
| 5 Working Days after Annual Results | 100% |
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