Global Dairy Trade: Australian farmgate expectations rise

International dairy prices are surging. So does that mean farmgate prices will rise too? Here’s what farmers are saying.

An international dairy price spike is raising hopes of pre-Christmas farmgate step-ups for Australian primary producers.

The headline figure at the latest session of the Global Dairy Trade index lifted by a strong 4.8 per cent, to sit at $US3997 ($A6118) a tonne.

The robust rise to the GDT headline figure is the second-biggest increase in the GDT headline figure this financial year so far, only bested by a 5.5 per cent jump on August 20.

Butter prices led the way this week with a 8.3 per cent lift to reach US$6990 ($A10,700) — with a butter shortage in Russia having a flow-on effect to third party dairy buyers.

NSW Farmers dairy committee chairman Malcolm Holm said with three GDT sessions scheduled before Christmas, expectations would grow of a step-up on the back of improved international trade.

“There haven’t been any step-ups this season but international prices are rising, so farmers would expect to see farmgate prices to reflect those improved numbers,” he said.

“This latest result (with the GDT) is a good signal. Follow that up with another strong result and there’s few excuses for not raising the farmgate price.”

Blighty region farmer Malcolm Holm. Picture: Dale Webster

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.

Green drought enveloping much of Victoria has squeezed margins further with fodder prices rising in recent weeks.

Vetch is setting back farmers more than $400 a tonne, depending on the region, while cereal hay is hovering around the $350 a tonne mark.

United Dairyfarmers of Victoria president Bernie Free said processors needed to show good faith to farmers given the input cost squeeze.

“Without farmers, the processors are out of business. It’s good for the supply chain, and the wider rural economy, if a step up occurs in the coming month,” he said.

Fonterra chief executive Miles Hurrell said Middle East buyers led the strong GDT result, with demand increasing through October.

“It’s a fantastic result. It is November, these things can come and go pretty quickly,” Mr Hurrell said.

“We saw some good participation out of China (in the latest trading session), so it’s pleasing to see that. Some really good support out of buyers in the Middle East, so clearly their inventories have run down. But very quickly, in two weeks time, they could be sitting on their hands — so you’ve got to watch and see.”