Dairy processors refuse to repeat call for import parity pricing

Dairy processors wanted import parity pricing a year ago, but refuse to repeat the call after global prices soared to $10/kg milk solids.

Dairy processors wanted to cut farmgate milk prices last season as global commodity markets slumped, but refuse to raise them now world prices have soared.

Dairy processors who argued for import parity on farmgate pricing amid last year’s global market slump, have now refused to repeat the call as international markets rebound to push the commodity price to $9.47 a kilogram of milk solids, while they pay Australian farmers $8.15/kgMS.

In last year’s submission on the operation of the Dairy Code, processors argued they could not afford the “disconnect” between the 2023-24 price of $9.40/kgMS they were paying farmers and the global price of $7.30/kgMS.

At the time the Australian Dairy Products Federation’s submission to the federal government called for a new benchmark milk value to be established, based mainly on the global dairy trade, which could be used to trigger farmgate milk price cuts mid-season.

ADPF argued for the exceptional circumstance provisions of the code to be triggered once its new benchmark milk value fell “significantly” below the Australian farmgate price, with an independent arbiter overseeing negotiations on price cuts that it said would apply “until the end of the season”.

But now that global markets have swung back in processors’ favour, ADPF has refused to back raising the farmgate milk price, which now sits $1.35/kgMS below the global commodity milk value of $9.47/kgMS.

ADPF chief executive Janine Waller said processors acknowledged the “ongoing challenges regarding pricing in the dairy supply chain and is committed to fostering transparency around the value of domestic milk in Australia and in turn what this means for the broader dairy product portfolio”.

Australian Dairy Farmers president Ben Bennett said processors could not just argue for a benchmark that worked in their favour.

“There’s two sides to a conversation, “ Mr Bennett said. “They need to bring some sugar to the table as an offering, not just onions.”

While this season’s weighted average price was $8.15/kgMS, Mr Bennett said “if you’re a seasonal farmer you’re getting close to $7.65/kgMS”.

In contrast New Zealand farmers are on track to be paid $10/kgMS, plus a forecast dividend of 40-60 cents per share.

Mr Bennett said “we want to see processors make money, but not on the bones of dairy farmers”.

Under the current version of the Dairy Code exceptional circumstances can only be triggered by import restrictions in a key foreign market in response to a temporary biosecurity threat or a temporary trade shock involving one of Australia’s major dairy trading partners.