Australian Dairy Products Federation urge price reassessment

Milk prices paid to farmers need to be lower next season, processors claim, with current Australian figures disconnected from international markets. Have your say in our poll.

In Australia there is a disconnect between global commodity prices and farmgate milk prices, industry says. Picture: Zoe Phillips

Milk prices paid to farmers need to be lower next season, processors claim, with current Australian figures disconnected from international markets.

Australian Dairy Products Federation chief executive Janine Waller today said high raw milk prices — which are hovering around $9.50 per kilo milk solids — could not be sustained without a change in market conditions.

Her comments come as Saputo projected a weighted average opening farmgate milk price of between $7.80-$8.00 per kilo milk solids, a 15 per cent cut on current pricing.

“The Australian dairy industry will not be sustainable unless it remains globally competitive across the entire supply chain,” Ms Waller said.

“Seventy-one per cent, or more than 6 billion litres, of Australia’s total milk production is directly trade exposed to global commodity markets and exchange rates.

“This means our dairy products must compete with imports into Australia and exports around the world.

“However, in Australia there continues to be a disconnect between global commodity prices and farmgate milk prices.”

While Saputo has flagged a potential farmgate starting figure, both Fonterra and Bega declined to weigh in with a price following the Saputo announcement earlier this week.

The ADPF noted the spot Commodity Milk Value (CMV) was this week sitting at about $7.30 per kilogram of milk solids.

Janine Waller, ADPF chief executive

Ms Waller said the $7.30 figure was about 30 per cent or $2.00 below the current weighted average Australian southern region farmgate milk price of $9.40 per kilogram of milk solids.

Over the 12 months to March 2024 spot prices of major commodities – including cheese, skim milk powder and whole milk powder have all dropped.

“The most important of these to note is cheese, which has dropped by a massive 29 per cent,” Ms Waller said.

“This is important because Australian dairy processors manufacture more than 400,000 tonnes of cheese annually.

“So, cheese – the largest utiliser of Australia’s milk – has dropped by US$1800 per tonne, while the cost of production continues to rise.”

Dairy farmers, including United Dairyfarmers of Victoria president Bernie Free, have pushed back on processor calls to reduce the price paid at the farmgate.

“You only have to look at what’s happened over the past two or three cycles. Processors have come out with a low-ball figure like this one then they’ve had to up their game,” Mr Free said earlier this week.

“That’s the market economy. Processors want to provide the lowest farmgate price possible, farmers want the highest farmgate price possible.

In November 2023, The Weekly Times revealed an Australian importer of US cheese was building a $100 million “state-of-the-art dairy conversion facility” in Melbourne.

The ADPF noted more than 2 billion litres of milk equivalents entered Australia this year, up 17 per cent from the year prior.

“The reality is Australian consumers have accepted imported dairy products, and retailers and food service outlets are interchanging Australian cheese and butter with cheaper imported products at their discretion,” Ms Waller said.