What’s Moo-ving Milk Prices?

Australia’s milk production is slowly shrinking, with some regions shrinking faster than others, because milk processors are making it happen.

A significant reason for this shrinkage is the pricing and demand environment does not give farmers sufficient incentive or confidence to expand or improve, and, in some cases, this commercial environment encourages dairying properties to leave the industry.

Against all rationality and against the industry’s long-term interests, early in 2024 we began to see media stories from Australian Dairy Products Federation, the advocacy megaphone for dairy processors, saying milk prices are too high and they have to come down.

So many reasons, all fake, were advanced for this.

“We’ll see more imports displacing expensive Australian dairy products,” they said … though dairy imports fell last year - down 9.1 per cent for last financial year to May, exactly the period over which ADPF says milk prices would encourage more coming in.

“We want to increase the volume of Australian dairy products and keep imports out,” they said … though cutting prices will always reduce production and send dairy farms out of the industry.

Those who care about the long term and the facts know Australia’s dairy imports bounce around. Yes, they were up in 2022-3 … to about the same level as 2017-8. As has been reported in the media, the ADPF's own Milk Value portal shows cheese imports have been falling since November last year. The facts haven’t stopped processors claiming that high dairy imports are a big factor requiring that they make a big drop in farmgate prices for the 2024-25 season.

Milk processors have chosen to export into low cost markets, and now try to claim domestic farmgate prices must be kept low so exports are competitive in those markets – there’s no bottom point to such an argument, no lower and lower price at which they can’t claim that if the price was just a little lower they could sell into yet another market.

When the ADPF makes these demands for cuts at the farm gate, without any authority whatsoever from their members, they’re demanding a shrinking milk pool, less Australian milk in homes, and an unfair market. For any regulators who care to listen and watch, they’re demonstrating the market is still uncompetitive, and unfair, with farmers at the mercy of ADPF demands.

Mike Smith, eastAUSmilk Government Relations Manager