Farmgate milk price announcements leave producers in limbo

The opening farmgate milk prices announced this week have left dairy farmers concerned about their futures, with figures considerably down on last year.

How now: The opening farmgate prices for milk announced this week have left farmers concerned.

DISAPPOINTED dairy farmers say sluggish milk prices announced this week for next season will leave them “treading water” and pondering their future.

The opening farmgate prices for 2020-21 were 10-15 per cent down on 2019-20, hovering around the low $6 a kilogram of milk solids, as processors and suppliers adjust to new reporting requirements.

The mandatory dairy code of conduct required processors nationwide to report opening prices by a Monday deadline with most clearing $6/kgMS.

Fonterra offered an average $6.06/kgMS to kick off the 2020-21 season, with Saputo at $6.40.

Bega also offered $6.40/kgMS for southern Victorian farmers but $6.55 for northern Victorian operators.

Fitting with the pricing trend, Burra Foods offered an average of $6-$6.40/kgMS.

Australian Consolidated Milk offered a $6.30-$6.90/kgMS range for conventional milk, with a $6.60 average.

ACM offered organic milk suppliers an average opening of $8.60/kgMS and a2 milk suppliers a figure of 56 cents a litre.

Bulla has offered an average range of between $6.30 and $6.70 per kilo milk solids.

United Dairyfarmers of Victoria president Paul Mumford said the figures offered by most processors in the $6-6.50 range would leave farmers “treading water” financially.

“We’re looking at opening prices that are 10 to 15 per cent down on what we saw this time last year,” Mr Mumford said.

“The prices are not as bad as what they could have been, considering the uncertainty surrounding (coronavirus) — you can see the processors are taking a cautious approach.

“The view in the industry, though, is what we are seeing are minimum prices, that this gives the processors room to move by July 1. I think we need to see some form of step up in the medium term because these prices really are treading water for farmers financially, they’re not a great incentive.”

Australian Dairy Farmers president Terry Richardson said the opening prices were a little better than what some analysts predicted, but still reflected a cautious approach given current market conditions.

“We’re hopeful that the market will improve to provide an opportunity for some price step-ups, because farmers still have to manage high production costs,” Mr Richardson said.

“But at least farmers now have an opportunity to assess all opening prices and milk supply agreements, and make a decision as to which processor they want to negotiate with for the next year.”

Most processors cited international market uncertainty as a determining factor in soft farmgate pricing.

Fonterra Australia managing director René Dedoncker said: “Global commodity prices have softened and are back to early 2019 levels with GDT average prices between US$2800 and US$3000 a tonne.

“After considerable volatility, the Australian dollar has stabilised between US$0.64 and U$0.66 and we have based our pricing on this range.”

Burra Foods chief executive Stewart Carson told suppliers the impact of coronavirus around the world had been “unparalleled in terms of impact on both global markets”.

“However, one thing that does not change is that cows need to be milked, the milk needs to be collected and processed and dairy products have to be delivered to the market, which thankfully we have all managed to keep on doing,” he wrote.

Bega Cheese executive chairman Barry Irvin said it was still a very competitive arena for milk in southeastern Australia.

“The reality is that it’s been nice to see a bit of milk growth this year,” Mr Irvin said.

“But a lot of companies have still got spare capacity in their facilities, so competition for milk is strong.”

Saputo Australia chief operating officer Richard Wallace did not comment on the processor’s opening price. In a statement, Saputo management said: “while the code allows prospective step-downs in limited circumstances, (Saputo) has again committed to no price step-downs in any circumstances during the year, which honours our ongoing promise to suppliers.”

Bulla chief executive Allan Hood said the processor took a transparent pricing approach and did not apply a stop charge, volume charge or collection charge to suppliers.

“At Bulla, we made a commitment to suppliers that we will always open strongly and early and, while the current climate presented many challenges for our business, we are pleased to have been able to honour this for the season ahead,” he said.

Norco also released its pricing for its Queensland and NSW dairy farmers.

The Byron Bay co-operative’s board is offering its northern farmers a base price of 51c a litre for the spring fresh milk, rising to a peak of 59c in autumn.

For those Norco producers living south of Taree, the processor will pay a base price of 49c/l in spring, rising to 57c in autumn.

However Dairy Connect farmer group president and Norco supplier Graham Forbes said that once bonuses and the Coles supermarket incentive of 3.2 cents a litre were added, most farmers would be getting “in the mid to high 60 cents a litre range”.

The uniform farmgate price reporting highlighted the stark contrasts between states, a phenomena that did not go unnoticed by South Australian Dairyfarmers Association president John Hunt.

“Over the years, we often discussed the wild variation in prices between states but Monday really put them out there in stark contrast,” he told The Weekly Times.

“The opening prices aren’t good, they aren’t bad- the best you could say is that there’s room for improvement.”