Global Dairy Trade: Australian farmers look for spring step up

International dairy prices are on the up, raising expectations of a springtime step up. Here’s why.

Rallying international prices are raising farmer expectations of a springtime step up, with farmgate prices barely covering the cost of production.

The headline figure at the latest session of the Global Dairy Trade index lifted 0.8 per cent, to sit at $US3883 ($A5710) a tonne.

The modest rise to the GDT headline figure in mid-September comes off the back of a substantial rally in late August, when the overall indicator rose 5.5 per cent to reach $US3920 ($A5784) a tonne.

Cheese prices lead the way this week with a 2.9 per cent rise for cheddar to reach US$4441 ($A6537) while the mozzarella category rose 4.5 per cent to hit US$5351 (A$7876) a tonne.

South Australian Dairyfarmers Association president Robert Brokenshire said farmers expected processors to pass on some of the gains made in recent months.

“If we want a sustainable dairy industry, we need sustainable prices paid to farmers,” he said.

“Electricity costs have risen this financial year and interest rates are stubbornly high.

“When the processors have capacity to raise prices, and the picture is looking increasingly clear they do have that capacity, then naturally farmers expect to see that passed on in part.”

Dairy Farmers Victoria have estimated the cost of production in the state sits between $7.90 and $8.20 per kilo milk solids, meaning many farmers are currently either breaking even or barely making a profit.

Bega region farmer Phil Ryan said the cost of production argument from DFV was also the case north of the Murray.

“When the price in Victoria lifts, other states benefit. Western Victoria has battled through a really tough start to the season, so for the sustainability of dairy, step ups from the processors are needed not just there, but nationally as well,” he said.

The latest GDT lift comes a month after Saputo’s Canadian management came under fire from dairy leaders over comments made by a Toronto-based executive.

Saputo chief financial officer Maxime Therrien told investors he hoped the Australian farmgate price “would stick … for as long as we can” at the low figure of roughly $8.20 per kilo milk solids.