Has the dust settled on the milk supply contracts?

There has been a real frenzy of activity across Australia in the past month with all processors attempting to secure milk. Milk production is down across Australia and all processors are short of milk. There have been daily announcements re milk price increases, and this may continue in early July.

In Queensland, the last price increase announcement was by Bega (and DFMC) on 1 July although many are unaware of this. Of the 3 major processors Bega (and DFMC), Lactalis and Norco it would appear that Bega (and DFMC) are now on average paying the most for milk at over 88c/L. Lactalis is around 1c behind and Norco probably 2-3c behind on average.

However, averages mean very little and as I have mentioned continuously over the past few months every farmer coming off contract need to get income estimates with the same realistic assumptions off all processors to see who is paying the most for their farm.

There are still likely to be some farmers who change process during July. Some will exercise their 14-day cooling off period as processors continue to change prices. And some farmers will utilise the ability to supply uncontracted for 30 days before making a final decision.

So, as it stands now, how many farmers will change processor in Queensland this year? At least 10 farms will and probably closer to 15. This probably only represents about 10% of all farmers in southern Queensland who are off contract and can move processor. Although this is not insignificant, it is a disappointing outcome since many other farmers would be able to get a higher price by changing processors but for whatever reason have chosen not to do so.

If you haven’t checked your price with other processors, please do so today. Even if you have signed a contract, if it was within the last 14 days you can get out of that contract to sign with someone else paying a higher price, so it is not too late.

Eric Danzi, Co-CEO eastAUSmilk