Global Dairy Trade: Farmers call for pricing step up

Rocketing international dairy prices have prompted another New Zealand farmgate lift, but an Australian springtime step up is now off the cards.

Rocketing international dairy prices have prompted another New Zealand farmgate lift this week, but an Australian springtime step up is now off the cards.

Synlait is the latest NZ processor to step up – raising its offering to $NZ9.50 ($A8.53) per kilo milk solids – hot on the heels of two Fonterra NZ step ups this spring.

NZ dairy analysts expect the Kiwi farmgate price will surpass $NZ10 per kilo milk solids this season – it would be the first time the NZ farmgate has hit double digits.

Westpac senior economist Michael Gordon predicted $NZ10 ($A8.99) per kilo milk solids as Chinese buyers re-entered the milk market with renewed vigour.

“It would be a new record (NZ) milk price in dollar terms, though not after adjusting for inflation or the trend increase in farmers’ costs,” Mr Gordon said.

“Chinese buyers are facing a substantial challenge to rebuild their stocks of milk powders in particular.”

Australian Dairy Farmers president Ben Bennett said processors this side of the Tasman were “running out of excuses” by not providing a step up.

“We’re now in late November and we’ve heard nothing from the processors on step ups,” the southwest Victorian farmer said.

“What are the processors waiting for? Are they hoping farmers don’t realise that the GDT is up, and consistently up. Let’s have a bit more Santa and a bit less Ebenezzer Scrooge.”

The Kiwi price rise has been kicked along by a buoyant Global Dairy Trade index, which lifted 1.9 per cent last week, to sit at $US4089 ($A6266) a tonne.

It represents the second consecutive rise in the GDT with a 4.8 per cent boost earlier this month.

South Australian Dairyfarmers Association president Robert Brokenshire said the latest GDT results bodes well for a farmgate step up but sympathised with processors over lacklustre domestic conditions.

“There’s a clear upward trend with Global Dairy Trade, which is great to see. Prices at the farmgate are at the weakest they’ve been since the introduction of the mandatory code of conduct (in July 2020),” Mr Brokenshire said.

“Dairy farmer margins are squeezed in South Australia, Victoria and some other parts of Australia due to drought, interest rates and rising input costs.

“The processors similarly say they have tight margins, so the GDT should ease that somewhat.

“Our concern remains with Woolworths, Coles and Aldi and their pricing of milk – that is clearly having a deflationary effect on the domestic market and we urge them to reconsider their pricing on generic brands.”

Last week, NZ-based Fonterra chief operating officer Anna Palairet said Chinese dairy stockpiles were finally abating, helping stimulate international trade demand.

“Wonderful to see the continued strength in the Global Dairy Trade. Really driven through the strength from China, we’re seeing continued reduction in the base of raw milk out of China, which is pushing buyers onto the Global Dairy Trade,” she said.