New Zealand’s export dairy product mix has shifted towards the production of whole milk powder. This has resulted in a deficit in milk lactose to meet international standardisation requirements for whole milk powder. Currently, the deficit in lactose is filled using imported lactose with an estimated cost of New Zealand dollars 300 million annually. This study compares payment systems from America, Europe, Australia and New Zealand, and outlines possible strategies for payment for lactose to New Zealand dairy farmers. The prominent milk payment system in New Zealand is the ‘A+B-C’ multiple component pricing system, where A and B are the monetary values per kilogram of fat and protein and C is the penalty per litre of milk volume. An alternative payment system that may encourage farmers to increase the supply of lactose could be ‘F+P+L-V’ where F, P and L are the monetary values of fat, protein and lactose respectively and V is the penalty per litre of milk volume. This payment system is currently in operation at one small New Zealand dairy processor. This study has shown that the ‘F+P+L-V’ payment system results in smaller deviation from the true value of the milk for differing breeds, milk compositions and product mixes than the current ‘A+B-C’ system of milk payment.

NW, Sneddon, N Lopez-Villalobos, RE Hickson, and L Shalloo

Proceedings of the New Zealand Society of Animal Production, Volume 73, Hamilton, 33-36, 2013
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