Dairy leaders warn of lasting impact of opening prices

Dairy producers could be “working for nothing for 12 months” if processors don’t offer step ups to opening prices during the season.

Dairy farmers across southeastern Australia are concerned they are now locked into an unprofitable season, with the prospect of step-ups a “processor mirage.”

With the new season starting on Monday, most processors nationwide are offering between $7.80 to $8.30 per kilo milk solids, figures that Dairy Farmers Victoria estimates only cover the cost of production.

The only outlier is Norco, which is offering a whopping $12.35 per kilogram milk solids, but the co-operative only operates in the northern NSW and southern Queensland catchment area.

United Dairyfarmers of Victoria president Bernie Free said many primary producers would be “working for nothing for 12 months” if processors didn’t offer step ups during the season.

He echoed growing concerns across the sector that processors would keep their pricing in the low $8 range to recoup losses sustained in the high priced 2023-24 season.

“The processors say there’s the prospect of step-ups but there’s been a lot of talk about supporting farmers with little action to back it up. Is it a bit of a processor mirage, the idea of step ups? We’ll see but no-one is holding their breath,” Mr Free said.

“I’m supportive of the mandatory code of conduct but this season has shown there’s potential for a bit of tinkering, a bit of updating to ensure that it’s fair for dairy farmers.”

Dairy Farmers of Victoria president Mark Billing said the $7.80 to $8.30 per kilo milk solids offering from processors would put the sector’s production output into reverse gear.

He said the economic consequences for regional Australia would be particularly pronounced in dairy towns such as Colac, Kyabram and Leongatha, among other locales.

“We’ve crunched the numbers and the average break-even price in Victoria is between $7.80 to $8.20 per kilo milk solids. That mirrors what the processors are paying as of this week, meaning farmers will be working for nothing,” Mr Billing said.

“Even at $8.50 per kilo milk solids, at least that is something for farmers to work with.”

Mr Billing noted processor claims of battling an influx of imported cheese and butter didn’t stack up, with new figures indicating a recent decline.

Data from Dairy Australia has shown the import influx reached a peak in the 2022-23 financial year at 343,557 tonnes, with a slight easing this current reporting period of 316,000 tonnes by June 30.

NSW Farmers dairy committee chairman Phil Ryan said even regions with adequate to robust pastures would not be immune from the 10 to 20 per cent cut to the farmgate price.

“The processors really haven’t thought through the consequences of such a low price,” the Bega region farmer said.

“Even if you’re in a part of Victoria or NSW where you’ve had a good season, the flow-on of the poor pricing cuts into the profitability of all farmers. Western Victoria and parts of northern Victoria have had a poor autumn, that means higher fodder prices and you’ve also got poor livestock prices thrown into the bargain.”

Australian Dairy Products Federation chief executive Janine Waller said: “It’s important to remember the announced FMP are minimums for the season, with incentives on offer and the possibility of price reviews as global market conditions improve.

“While last year saw fierce competition among processors for milk supply to fill factory capacity, pushing milk prices up, this opening season was very different.

“Processors are adjusting their operations to match supply, ensuring economic viability for the future. This strategy aims to protects jobs and the dairy products we love, safeguarding the industry for years to come.”