Australian farmgate milk prices: Dairy status quo defended by processors

The group representing milk processors claims strong dairy prices on international markets do “not necessarily translate” to a better return at the farmgate.

The United Dairyfarmers of Victoria have called for Australia’s big three processors to step up farmgate prices. PHOTOGRAPHER: ZOE PHILLIPS

ROBUST international dairy prices “do not necessarily translate” into a strong farmgate figure, the group representing milk processors has claimed.

Australian Dairy Products Federation president Grant Crothers has pushed back on calls by the United Dairyfarmers of Victoria to raise farmgate prices, despite a recent boost at the farmgate in New Zealand.

Last week in Auckland, Fonterra lifted its 2020-21 forecast farmgate range to NZ$6.90-$7.50 kg/milk solids (A$6.52-$7.09) for its New Zealand suppliers.

However, Fonterra Australia, along with rivals Saputo and Bega, have maintained the farmgate average at $6.40 kg/milk solids, with some regional variations.

Writing in today’s edition of The Weekly Times, Mr Crothers rebutted claims the sixth consecutive rise on the Global Dairy Trade index last week should translate into a step up for Australian farmers.

“Increases in the GDT Price Index are welcome but due to being in US dollars do not necessarily translate into FMP (farmgate milk price), which is in Australian dollars,” Mr Crothers wrote.

“The exchange rate between AUD and USD is a key ingredient in the value of raw milk. We are regularly told we are a trading nation and while we are proud of our export capability, imports increasingly influence FMP.”

However, the United Dairyfarmers of Victoria has argued for some time that both international and domestic conditions were both favourable, with the Australian currency exchange rate not the factor it once was.

UDV vice president John Keely said the many suppliers across the state believed it was time the major processors moved upwards at the farmgate.

“You’d be hard pressed to find a farmer that thinks the price is right as it is. It’s February now and a step up is overdue,” the Cohuna region farmer said.

“The processors started off with a conservative figure in June, that’s fine, but it doesn’t reflect where the market is at now.

“They can’t hide behind the mandatory dairy code. The code doesn’t stop the processors stepping up and a lot has changed since the season opened seven months ago.”

Last week, Fonterra chief executive Miles Hurrell said the Auckland-based processor’s decision to lift the NZ farmgate figure result of strong demand for dairy — demonstrated by the continued increase in GDT index.

Fonterra Australia was contacted by The Weekly Times but the query was redirected to Mr Crothers. Both Saputo and Bega have declined to comment on their farmgate figures.

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