Lower Prices will be a Disaster for Farmers and Milk Production

It is extremely disappointing to see opening prices announced this week down by around $1-$1.50/kg milk solids (8-11c/L). Processors, via their representative body ADPF (Australian Dairy Products Federation), have been talking down farm gate prices for the last year.

The vast majority of Australian milk is sold domestically including around a third going into milk bottles. So it is hard to understand the obsession of some milk processors and ADPF on exports and using this to drive down farm prices.

Farmers in Victoria and other areas which are on 1-year contracts will bear the brunt of lower milk prices in addition to the very dry conditions in Victoria and other areas.

Most dairy farmers in Queensland and NSW are on 2-5 year contracts that do not expire until at least mid next year. So in the short term prices will not change for most of our farmers. However, the lower prices announced will send a shiver down the spine of dairy farmers everywhere. Any farmers who are off contract need to shop around and compare prices from all processors.

If prices do not increase significantly in the next month before contracts are finalised, then milk production will fall massively in the next year and almost certainly fall below 8ML nationally. Processors will get their way to drive down price, but production which will likely never recover. Farmers need confidence in the industry and this will only occur if processors commit to stop dropping prices.

This is a ridiculous and dangerous outcome, driven by short-sighted decision-making amongst processors. It was just six months ago that a Commonwealth Parliamentary report on food security said dairying is in trouble and needed a stand-alone strategy to build reliability of supply, and here are the processors, led by Australian Dairy Products Federation, already actively trying to cut milk supply in the interests of delivering excess profits next year. If the Commonwealth adopts that report, they’ll have to work out what to do about this bad behaviour.

Joe Bradley, eastAUSmilk President