Milk Production, Farmgate Price and the Mandatory Dairy Code

Milk production data has been released by Dairy Australia for December 2022. It shows a continued decline in milk production throughout Australian dairy States, as shown by the graph below:

Source: Dairy Australia (https://cdn-prod.dairyaustralia.com.au/-/media/project/dairy-australia-sites/national-home/pages/milk-production-reports/national-milk-production-report-december-2022.pdf?rev=0af5a5fc28e347b3a4bf498f2fc5f53f)

The data also indicated that national milk production for December 2022 "showed a 6.5% decrease on December 2021, whilst national year-to-date was down 7.1%".

These figures are concerning.

It has been suggested by some dairy commentators that the milk production for 2022/2023 may fall beneath 8 billion litres for the first time since 1992/1993.

Hence, the up-coming 2022/2023 milk supply agreement negotiations between dairy farmers and processors for a fair and profitable farm-gate price is essential for retention of dairy farmers within the dairy industry and increased milk production.

As negotiations begin, dairy farmers should review the safeguards provided by the Dairy Mandatory Code since it commenced in 2020.

Processors must place on their websites before 2pm 1 June their standard form milk supply agreements, which must be available for all to access. They must also provide pricing justification, be genuine and comply with the provisions of the Code.

Importantly, the Code is predicated upon good faith discussions in reaching an agreement and be in plain English.

While the Code does not set a minimum price, it does state for instance that a minimum price must be included in the agreement after consensus is reached. It also indicates that the agreement must have a cooling off period (14 days) and include a definite supply period with quality and quantity requirements specified.

This requires a level of trust and cooperation between the parties, which the Code has been restoring over the past years since the collapse of Murray Goulburn in 2016.

Being prepared for your negotiations and having access to the most up-to-date information is essential to reach a reasonable and transparent agreement.

The ACCC has published a fact sheet for dairy farmers which may be accessed at https://www.accc.gov.au/publications/what-the-dairy-code-means-for-farmers-fact-sheet

Further assistance is also available from dairy advocacy bodies like eastAUSmilk.

Shaughn Morgan, Co-CEO eastAUSmilk