Australian Dairy Farmers group warns of the risks of inflation

A big jump in interest rates and galloping inflation is hitting dairy farmers in the hip pocket.

Skyrocketing interest rates mean processors need to come out with robust opening prices on June 1, the Australian Dairy Farmers group says.

ADF policy director Craig Hough has crunched the numbers and said the average Australian dairy farm debt was now $1.2 million.

“That $1.2 million figure is a record high,” he told The Weekly Times.

“The Reserve Bank has lifted interest rates eight, nine, 10 times over the past 12 months.

“It’s the fastest acceleration in interest rates in the Reserve Bank’s history. There’s been a lot of commentary on the impact on households but the impact on farmers, particularly young farmers with a mortgage, shouldn’t be ignored.”

Mr Hough said inflationary pressures from electricity, petrol and fertiliser would all weigh down profitability for dairy farmers heading into the new season.

He noted the International Monetary Fund has forecasted that inflation across the industrialised world will fall to 6.6 per cent in 2023 and 4.3 per cent in 2024.

“That’s an inflation rate that’s still above pre-pandemic levels- when it was hovering between two and three per cent,” Mr Hough said.

“And unlike households, farms by their nature always have higher electricity bills, higher fuel needs. Fertiliser and other costs that households don’t have should be factored in as well.”

Farmers are preparing for the June 1 pricing deadline. Picture: Zoe Phillips

Processors are required to publicly declare opening prices on their websites by June 1, as part of the mandatory dairy code of conduct.

United Dairyfarmers of Victoria president Mark Billing and other farm lobby leaders say processors need to pay close to $10 per kilo milk solids to keep farmers profitable.

It’s a sentiment Mr Hough shares.

“Yes, there’s much conversation about record prices but there have been record costs too,” he said. “So the processors will need to pay close to $10 per kilo to keep farms viable.”