UDV president urges processors to aim high in opening price countdown
With only a month to go before processors reveal opening prices, Victoria’s dairy lobby leader says processors need to aim high as a low benchmark will force farmers to consider the future in the sector.
PROCESSORS need to aim for at least $7 per kilogram of milk solids in their opening prices if they want to maintain industry stability, the United Dairyfarmers of Victoria president says.
Paul Mumford said any opening price “with a five in front of it” would force many farmers to walk off the land in the 2020-21 financial year, undermining the sector’s financial fortunes.
As part of the freshly-introduced mandatory Dairy Code of Conduct, processors nationwide will have to report opening prices by June 1 as part of the push for greater transparency in the sector.
The code requires all processors to publish the agreements and prices, as well as reports on any disputes with suppliers, by 2pm on their respective websites.
“If we see opening prices at $5 (per kilogram of milk solids) or really any opening price with a five in front of it, immediately we will see farmers considering their options. For many, that type of opening price is unsustainable,” Mr Mumford said.
“Particularly when you look at what’s happening abroad, milk being poured down the drain in the United States and in some parts of Europe, you need to start the financial year off with some confidence.
“Australian dairy has been tracking well for the start of the coronavirus (situation) but all eyes will be on June and whether those opening prices stack up.
“Anything with a six in front of it, we will still see a reduction in the national milk pool — even $6.50 to $6.70 won’t fill many with confidence.
“Getting to $7 (per kilogram of milk solids) will provide stability for the industry. Getting up to $7.50 would be a progressive move, a move that would provide the confidence needed at a time of global economic uncertainty.”
Fonterra had a 2019-20 opening price of $6.60 a kilogram milk solids, while Saputo went with $6.80 and Burra Foods went with a price range of $6.40-$6.70 a kilogram milk solids.
Mr Mumford said opening prices needed to reflect inflation as well as the need for primary producers to have some sort of financial buffer at the farmgate.
Under the mandatory code, dairy processors must include a statement justifying the minimum prices offered in new milk supply agreements.
Processors will only be able to buy milk from farmers with whom they have a milk supply agreement.
The new code came into effect at the start of the calendar year, but did not apply to contracts entered into before that date.
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