2024-25 Australian dairy farmgate confidence as Red Sea risk abates

While it’s still only February, Australia’s dairy farmers have an eye on next year’s farmgate prices. Here’s how they are shaping up.

A Red Sea-related risk of dairy deflation appears to be abating with renewed hopes of a fortified farmgate prices by the new financial year.

Industry leaders gathered at the Australian Dairy Conference in Melbourne last week expressed confidence the average farmgate price would be close to the robust figures paid in the 2023-24 season.

Victorian farmers are being paid at least $9.00 per kilo milk solids with many enjoying above the $10 per kilo threshold, while north of the Murray, $11 and $12 per kilo returns are being paid in the tightly held Sydney and Brisbane milk markets.

Dairy Farmers of Victoria president Mark Billing said the increasingly domestic nature of Australian dairy meant international prices fluctuations were not as pressing as previous seasons. But he added the stabilisation of the Red Sea impasse helped.

“It’s early days given we’re in February, but it’s fair to say confidence is growing around the farmgate price,” Mr Billing said.

“We’ve had several rounds of the GDT (Global Dairy Trade index) that have been positive but the fact is Australia’s milk pool is still lower than what has been anticipated.

“There’s strong demand from domestic consumers and in a tight marketplace, the processors will need to pay competitive prices at the farmgate to retain supply.”

\Attacks on shipping in the Red Sea could hit global supply lines and delay the delivery of major industrial and consumer staples including chemicals, steel, cars and food products. Picture: NCA NewsWire /Brendan Beckett

This week, the European Union launched a naval mission to protect Red Sea shipping from Yemen’s Houthi rebels as attacks by the group forced the crew of one vessel to abandon ship and damaged another.

The Iran-backed Houthis, who control much of war-torn Yemen, have been harassing the vital shipping lane since November.

Dairy Australia workforce and competitiveness manager Karl Ellis said reports of container supply issues had only a limited impact as of mid-February.

“As the majority of Australia’s dairy exports travel north to Asian markets, the issues in the Red Sea haven’t had a direct impact on Australia’s exports,” he said.

“However, the issues in the Red Sea combined with the reduced number of ships through the Panama Canal have resulted in higher shipping costs globally and reports of container supply issues, which appear to have only had a limited impact so far.”

Australian Dairy Products Federation executive officer Janine Waller said processors were under intense pressure due to high input costs.

“To continue delivering high-quality dairy products in Australia a concerted effort from all

stakeholders – government, industry, and consumers - is essential,” she said.