WARRNAMBOOL Cheese and Butter (WCB) has announced a strong cash incentive to encourage suppliers to produce more milk.
The incentive scheme will run over four years and give suppliers an additional payment for any extra milk produced.
"We want our suppliers to produce more milk," chief executive David Lord said.
"This partnership recognises the costs involved in growing and is a way for the company to share in those costs."
The incentive will be paid on all additional milk above a supplier's average for the previous two years.
It amounts to three-and-a-quarter cents per litre (c/l) averaged across the four years, with payments of 6c/l for the first year, 4c/l for the second year, 2c/l in the third year and 1c/l in the final year.
WCB will pay 75 per cent of the first year's payment up front, based on anticipated growth.
Mr Lord said a farmer increasing production by a million litres would receive $60,000 in the first year, with $45,000 of that paid up front.
The incentive applies to growth by any means, whether it is achieved through buying more land, increasing herd numbers of boosting cow production.
The company will also announce a price step up this week of 10 cents per kilogram butterfat and 25 cents per kilogram protein, taking its farm gate price to 6.85 cents per kilogram of milk solids, with one more price review to come before the close of the season.
"It's close to the best price we have ever paid," Mr Lord said.