Australian dairy farmgate prices: eastAUSdairy takes on Lactalis

Controversial processor Lactalis has just announced its opening farmgate milk price, and a leading dairy group says farmers are “disgusted”.

Controversial processor Lactalis has been lambasted by eastAUSdairy over its opening price, two days out from the dairy code deadline.

The French dairy giant announced a cut of 5 cents a litre in its milk price, making it only the second processor to provide a figure ahead of the June 1 publication date.

Processors nationwide are required under the federal government’s mandatory dairy code of conduct to publish their opening prices on their respective websites by 2pm on Thursday.

As of 9am Tuesday, Lactalis has not published prices on its website but has provided a revised-down figure of 82.3 cents per litre for Queensland farmers milk and 76.7c/l in NSW the 2023-24 season.

French giant Lactalis are one of Australia’s biggest dairy processors

EastAUSdairy chief executive Eric Danzi said dairy farmers in Queensland and northern NSW were “caught off guard” by the Lactalis announcement.

“The surprise soon turned to anger and many Lactalis suppliers have reached out to me expressing their disgust,” Mr Danzi said.

“Given the massive shortage of milk in Australia, especially in Queensland and NSW, this announcement makes no sense at all.”

Earlier this month, Bulla provided an opening price of $8.80 to $9.60 per kilogram of milk solids.

But the Colac-based processor said at the time that the figures were “a starting position” with an expectation that prices would rise in the coming weeks due to competition for milk supply.

Mr Danzi echoed that sentiment, saying rivals in the Brisbane and Sydney fresh milk markets, such as Bega and Norco, now had an opportunity to best Lactalis in the pricing stakes.

“This appears to be a poorly thought-out strategy designed to suppress milk price. It is now likely that the strategy will backfire on Lactalis,” he said.

“It is incredibly unlikely that Bega, DFMC and Norco will follow suit and as such Lactalis is likely to lose a lot of milk to other processors from their bold strategy.”

Lactalis Australia chief executive Mal Carseldine said the processor undertook “exhaustive analysis before determination and publication of its milk price offering.”

“The weighted average price for NSW is 76.7 cents per litre (which is the) equivalent to $10.70/kg of milk solids,” he said.

“And for Queensland it is 82.3 cents per litre — the equivalent of $11.26/kg of milk solids.

“In addition, we are also introducing a new pricing model that allows farmers to maximise their income based on either conventional cents-per-litre pricing, or based on fat and protein content. Price incentives based on volume are also part of our offering.”

Mr Carseldine said the determination of Lactalis’s milk price accounted for the broader Australian dairy industry, farmers, customers and consumers.

“In order for the Australian dairy industry to prosper, it is vital that the correct balance is struck in order to serve the interests of these groups,” he said.

“Key amongst our considerations for this year’s opening offer is the continued viability of sustaining record high milk prices in the face of severe inflationary pressure, escalating operating costs, declining milk volumes, weakening consumer demand and intense market competition.”

Last year, the Federal Court ruled that Lactalis Australia breached the mandatory dairy code of conduct.

In a win for the Australian Competition and Consumer Commission, the court found Lactalis breached the code when it failed to publish its milk supply agreements on its corporate website by the 2pm deadline on June 1, 2020.

Mr Danzi said processors who were prepared to offer reasonable price increases early must be rewarded with farmers signing contracts.

“I strongly encourage all Lactalis suppliers speak to all other processors and be blunt about what price would get them to immediately sign a contract with another processor,” he said. “Most dairy farmers would tell you that given cost increases, anything less than a 3c/L price increase is tokenistic and not worth signing a contract for,” Mr Danzi said.