Australian dairy farmgate prices: Cost of living cuts into farmgate

Australian shoppers are cutting back how much they spend on dairy products — and its set to impact farmgate prices.

Dairy processors are compelled to release opening price figures on June 1. Picture: Zoe Phillips

Processors are preparing farmers for lower opening prices, with only a fortnight to play out before they have to reveal their cash-figure cards.

Cost-of-living cutbacks by Australian shoppers have received some blame for the weaker market sentiment, with a June 3 deadline for processors to confirm their first offerings for the new financial year.

The only indicative figure has been released by Saputo, which gave its suppliers a ballpark range of between $7.80-$8.00 per kilo milk solids, although management added this may not be their final offer.

The Weekly Times surveyed all of Australia’s major processors and all were keen to keep mum about their opening figures, in stark contrast to effective bidding wars in recent seasons.

Fonterra farm source director Matt Watt said many shoppers were cutting back on dairy produce due to cost of living pressures.

“The environment remains challenging with lower cost dairy imports continuing to come into Australia and creating price barriers to export,” he said.

“In recent years we’ve seen a strong commodity market, strong consumer demand and a shortage of milk to meet this demand going into the new season, however for (the new season) we are seeing a weaker commodity market and lower consumer demand due to cost of living pressures.”

Mr Watt said Fonterra’s export cheese contracts negotiated through May and June would give a clearer picture of its milk price for the new financial year.

The headline figure of the Global Dairy Trade (GDT) index rose 1.8 per cent last week to sit at $US3708 ($A5640), the third consecutive session in positive territory.

Norco chief executive Michael Hampson said a rising international market was only one factor, with Sydney, Melbourne and Brisbane sales softening for all dairy processors.

Last week, The Weekly Times confirmed more international cheese was being imported into Australia than Australia exported to the world, inverting a long-term trend.

“The domestic market is not without its challenges,” Mr Hampson said.

“Cheaper imported dairy products, due to lower farm gate milk prices in those countries, are taking market share from Australian-made products due to the cost of living crisis.

“This means that there is less Australian milk that is able to generate premium returns to hold farmgate milk prices at historically high levels.

“The decline in some brand’s fresh milk sales over the past 12 months, also corresponding to the cost of living crisis, may reduce the ability of some processors to hold milk prices at the record levels seen in recent years.”