Fonterra grading system likely to curb use of PKE

New Zealand imports of PKE have increased from 96,000 tonnes in 2003 to 2.3 million tonnes this year. Photo / MPI

Fonterra's new fat evaluation index (FEI) grading system which came into effect on September 1 is forcing dairy farmers to look more closely at what products they are feeding their cows.

"For many farmers FEI isn't an issue, but farmers who use a lot of palm kernel expeller (PKE) have been changing up their feed options to mitigate or avoid penalties," says Daniel Calcinai, general manager of GrainCorp Feeds.

Fonterra established the FEI test to measure the fat composition in the cow's milk it collects to ensure it is suitable for manufacturing products that meet customer specifications.

The use of PKE as a supplementary feed was identified as a key influencer on high FEI levels in dairy milk.

A byproduct of the palm oil extraction process, PKE had become popular as a feed option in dairying, due to its relative low cost.

However high use of PKE can impact the fatty acid profile of milk, and has led to manufacturing challenges for Fonterra with certain products.

Fonterra's FEI test was rolled out nationwide in March 2017 and since May last year farmers have been able to view their FEI results and take steps to improve poor test results.

As of September 1, farmers suppling milk to Fonterra with higher-than-acceptable levels of FEI are incurring demerits and financial penalties.

"The FEI test analyses the milk and if the levels are above a certain threshold during the grading process then the farmer is penalised — in some cases, up to 20 per cent of the value of that day's milk," says Calcinai. "That is a significant amount of money for those affected dairy farmers."

The FEI grading framework is on an A-B-C-D scale, with A grade milk meeting requirements, a B grade approaching the threshold limit (alert), a C grade exceeding threshold limits (2 demerits and 10 per cent deduction per collection day) and a D grade well in excess of the limit (with 4 demerits and 20 per cent deduction per collection day).¦