Australian dairy processors say conditions ‘very challenging’

Seven years on from the clawback, milk processors say they’re experiencing “very challenging times”.

High farmgate prices mean Australia’s milk factories are facing “very challenging times,” the nation’s processor supremo says.

Australian Dairy Products Federation executive chairman John Williams said processors will pay “extremely competitive prices for milk” throughout the 2023-24 season, despite a drop on international milk markets.

Australia’s big three processors — Bega, Fonterra and Saputo — are now paying around the $9.00 per kilo milk solids mark, with some smaller players aiming higher.

“These are very challenging times for Australian dairy processors,” Mr Williams said.

“They are competing for milk supply in a shrinking national milk pool, and they are also competing with lower cost product both on the export and on the domestic front.

“On top of this, they are also contending with exorbitant overhead and input costs,

inclusive of energy, labour, transport and raw milk.”

All processors were mandated by the dairy code of conduct to publish their initial opening prices on June 1.

Some processors, such as Lactalis, went with low-ball figures before increasing their offers.

The ADPF noted that on June 1, the Oceania commodity milk value – a forward milk price indicator – was $6.47 per kilo milk solids.

The processor group said the average weighted farmgate price currently stood at $9.15 per kilo milk solids, about 29 per cent higher than the Oceania figure.

“Australian dairy processors are currently paying in the order of 20 per cent higher farmgate milk prices in Australia compared to New Zealand,” Mr Williams said.

“This clearly places Australia at a competitive disadvantage not only in export markets, but it is also being reflected on our supermarket shelves.”

Australia’s big three processors — Bega, Fonterra and Saputo — are now paying around the $9.00 per kilo milk solids mark.

In March, The Weekly Times reported that an influx of New Zealand-made butter was making its way onto Australian supermarket shelves, edging out its homegrown equivalents.

Mr Williams said foreign dairy produce was gaining a larger presence on Australian supermarket shelves.

“We know that imported products from New Zealand are up 22 per cent year-to-date (from) February 2023,” he said.

“Imports from the United States are up 46 per cent.”

As farmers plan ahead for the 2023-24 season, the ADPF promoted its Milk Value Portal.

“The Milk Value Portal is a well-established, credible source of primary information,” Mr Willams said.

“Particularly in the month of June - provides farmers across the eight dairy production regions in Australia with clear price indicators and greater certainty around the upcoming milk price season.”