Thanks Colin

Highly respected NSW dairy farmer Colin Thompson passed away last week. Colin and his wife Erina ran an elite Total Mixed Ration (TMR) dairy farm in Cowra. They milked around 300-350 cows in a free stall and averaged around 45L per cow per day. Colin was widely regarded as being one of the top handful of dairy farmers in Australia and was a real gentleman with integrity and a desire to help others.

Colin was a real leader in the industry and was passionate about dairy farming. He was obsessive about doing everything absolutely spot on and this obsession resulted in elite results that many other farmers watched and followed. I knew that Colin’s knowledge and experience would be of great interest to dairy farmers in Queensland. And I knew that dairy farmers in Queensland, especially TMR farmers, could learn a lot from Colin.

As a result, in early 2020 I asked Colin to give presentations throughout Queensland about his farm and journey as a dairy farmer. His farming story impressed a lot of farmers and really blew some away with what was possible. It was clearly not realistic or practical for most farmers to copy everything that Colin did.

Colin was not egotistical re his approach, but rather trying to help farmers find a few things of relevance to their farm to improve their operation. I know a number of farmers made changes as a result of Colin’s grand tour. From small changes like putting in more water troughs near feed pads to spending a lot of money in new concrete silage pits.

Colin had an obsession that cows must have an abundance of clean water to drink at all times. Any time he saw anything but pristine water for cows he would ask me “would you drink it?”. I would always answer no and he would say well neither will cows. I got the message Colin.

Thanks Colin for everything you did to lead the dairy industry and be a farmer that others followed with your farming practices. And to Erina and your family, my thoughts are with you.

Eric Danzi, eastAUSmilk CEO

Thanks to the dairy farmers of Wagga Wagga, Blighty and Finley

Last week, my president Joe Bradley and I visited dairy farmers in one our southern most areas around the towns of Wagga Wagga, Blighty and Finley. We were blown away by the reception we received from all the local dairy farmers. A trip to the area was long overdue and prompted by a question by dairy farmer Nina Marshall as to why I hadn’t visited the area yet.

We met with 6 dairy farmers in Wagga Wagga and Tumut including a visit to the farm of Amy and Melinda Hayter. This was an opportunity for Joe to continue his obsession with Brown Swiss cows. The cold conditions in Tumut were a far cry from the Queensland weather Joe and I are accustomed to.

We then moved to the Finley and Blighty areas where we met with around 40 dairy farmers. The willingness of farmers to show us their farms and welcome us to their community was overwhelming. We were blown away by the farms we saw and certainly gave me a new perspective on what is possible in the dairy industry. The scale and efficiency of operations was extremely impressive, and all dairy farmers should visit and learn from these dairy farmers.

The farmers really appreciated the opportunity to gather and talk with their fellow dairy farmers which is something they have not done for years. Clearly for many of the farmers they felt like they were the forgotten dairy farmers of NSW being so isolated from other farmers.

The massive drop in milk prices announced on 3 June was the major talking point as was the dumping of some farmers by their processors. We all hope that prices lift or there will clearly be a lot of farmers cease especially for those whose contracts expired in June.

A very special thanks to Ruth and Neville Kydd for hosting Joe and I. it was great to finally see what I have heard Ruth talk about for many years. The Kydds run a very impressive operation and are rightfully highly respected by their local farmers. The Kydds are due to open their new 80 stand rotary in early July (we hope for Ruth’s sake) to go with the two 50 stand rotaries they already have. The rumour is that if the electricity isn’t hooked up in time the dairy will be powered by Ruth’s pedal power.

Eric Danzi, eastAUSmilk CEO

Mary Basin Water Plan

The latest Mary basin water plan was released last week after 3 years of development. Several Mary plans have been developed in the past 20 years with new elements added each time. Most importantly for dairy farmers in the Mary valley, this plan has converted previous area based licences into volumetric licences.

During the first half of the plan’s development, farmers were not fully engaged in the process. Many farmers probably didn’t understand how important this plan is for their farm and the need to be critically involved. When the draft plan was released in February 2023, many farmers were not happy with the allocations they were given and needed assistance. eastAUSmilk got involved and we engaged Ian Johnson to help as he had done a few years before in the Upper Burnett area.

A lot of work was required to figure out what had happened including the negative impact of each member. In the end, eastAUSmilk helped all our members develop individual applications relating to their farm to justify a reasonable water allocation. This work resulted in most of our members getting a good allocation from the plan. Some farmers still do not have a reasonable allocation and are looking at options of what to do next.

I encourage all farmers to take the development of water plans extremely seriously. When they are being developed in your area, get heavily involved and if you are an eastAUSmilk member ask for our help immediately. And if you ever notice something on your licence or water bill that doesn’t look right ask for help.

Unfortunately in the past, government has done things like dictate baseless volumetric allocations and have consequently been unwilling to change them. If this happens to you, complain immediately and well before a plan is developed. This happened to a farmer in the Mary who is being forced under the plan to live with less than half the water he requires on a farm.

Eric Danzi, eastAUSmilk CEO

Codes and Competition on Agenda

EastAUSmilk has in the last week held multiple meetings with Commonwealth public servants and politicians to discuss the Dairy Industry Code, Fruit and Vegetable Code, competition policy, and the needs of the dairy industry.

In Canberra and in Brisbane, Chief Executive Officer Eric Danzi and Government Relations Manager Mike Smith met with senior officials from Treasury and from the Department of Agriculture, Fisheries and Forestry, as well as the Assistant Minister for Competition Charities and Treasury, Dr Andrew Leigh.

While eastAUSmilk has made substantial submissions to several of the inquiries currently underway into the behaviour of major supermarkets, we needed to understand where the multiple reviews of supermarkets are going, and what the next steps are likely to be. Also discussed were both the recent eastAUSmilk submission on the review of the Dairy Industry Code, and what comes next for that review.

Everyone we spoke with was very keen for information about how the market really operates, rather than dry economic theory, and we were able to provide many examples of anti-competitive behaviour and bullying, along the supply chain.

We also invested time, in some of our meetings, in explaining why farmers are demanding change in the priorities of Dairy Australia, and discussing some pressing research and extension needs which are not being addressed.

In light of these discussions, eastAUSmilk has responded to the recent Interim Report of the Review of the Food and Grocery Code, by calling for more detail on how big supermarkets must change to eliminate bullying and retaliatory behaviour towards suppliers, reshaped our call for supply chain margins to be monitored, and tackled the need for the uncompetitive outcomes of national pricing and preferential pricing for private label products to be addressed.

Department of Agriculture, Fisheries and Forestry told us that once they have fully digested the submissions made in response to their recent Dairy Industry Code discussion paper, they will be making recommendations to Government about the scope of the full second review of the Code, and how it will be conducted. They have not yet fully examined and evaluated those submissions, but Minister Murray Watt recently committed that the second review will fully commence in September this year.

By Mike Smith, eastAUSmilk Government Relations Manager

It’s Showtime!

Last week I visited the Sydney Easter show with my president Joe Bradley.  It was my first opportunity to visit the show and I was interested to see what it was like after hearing so much about it. The show is very impressive and a great legacy from the Sydney Olympics from 24 years ago. There is so much space throughout the whole venue and so many great facilities.

The dairy pavilion is also very impressive being so large and comfortable for both cows and farmers. Also, for members of the public to see where their milk comes from. The milking shed was quite remarkable and allowed the public to comfortably watch cows being milked in a real modern herring bone dairy without getting in the way of farmers and the cows. The judging area being adjacent to the dairy pavilion also made it very easy for all, although some rain on the final day of judging caused a slight inconvenience.

The quality of the cows was impressive, and the international judges noted the improvement in the quality of animals over the past 5 years including for the Brown Swiss breed. I am a complete novice when it comes to judging the quality of cows, but I’m sure my Italian friend Angelo speaks with authority when he states this.

It was also great to meet so many dairy farmers and have many discussions with them about the challenges facing their futures. It would have been great to speak to more farmers, but the demands and stresses of showing cows means that I didn’t have that opportunity with all farmers.

I look forward to one day returning to the easter show. More importantly, I look forward to greater mixing between NSW and Queensland dairy farmers at future events including the Sydney show and Ekka.

By Eric Danzi, eastAUSmilk CEO

Dairy Symposium

On 22 March, a national dairy symposium was held in Melbourne. Almost 100 people attended included myself, the eastAUSmilk president Joe Bradley and a range of people from industry, government and unions. The key issues in the dairy industry are restructuring the dairy industry, increasing profits leading to growth and prioritising Australian dairy products.

Restructuring the dairy industry was the key outcome from dairy plan and nothing has been done on this front except QDO merging with Dairy Connect to form eastAUSmilk. This has caused massive frustration for dairy farmers who want duplication and waste removed and outcomes for dairy farmers. This was the focus of a farmer forum before the main symposium and the need for change was extremely clear to farmers and their representatives. Unfortunately, this issue was barely touched on during the main forum.

Minister Watt committed to seriously considering proposals from the industry to restructure the industry. Given the minister overseas Dairy Australia, no meaningful restructuring is possible without his approval. He has the power to lead or block change in the industry.

There was some discussion re increasing profitability and production and a commitment from the minister to explore this further. Key issues to drive profit and production including increasing the price and fixing market issues relating to the retail sector. The 7 retail inquiries must lead to meaningful change not be swept under the carpet. Improving pastures is critical for farmers in Queensland and NSW where we have lagged behind over the last 50 years. Restructuring the industry to effectively focus on farmer profits and production is key.

Australian dairy products must be prioritised in the eyes of consumers. It is hard to understand why countries who heavily subside their industries are able to dump products into Australia.

If the dairy symposium is to be of value, then rapid progress must be made on the real issues facing the dairy industry. If not, the decline will continue and it will be another talk fest with no outcomes for farmers.

By Eric Danzi, eastAUSmilk CEO

Milk prices and dairy code

Now we are into January, everyone in the dairy industry will start to focus on what will happen to milk prices in July. The dairy code requires processors to publish preliminary prices and contracts by 1 June and some will make announcements well before then. And speculation will increase in the coming months as both farmers and processors try to feel out what will happen.

There has been a lot of complaining by some processors and processor representatives about the dairy code and milk prices. Some media commentators, claiming to present a professional view, have simply repeated the views of some processors and their representatives.

They claim the Dairy Industry Code is distorting the market and forcing farmgate prices too high. That’s simply not true.

The Dairy Industry Code has corrected some of the market failures in the dairy industry and gone some way to ensuring farmgate prices reflect competition for milk. That is about supply and demand for milk across Australia and within each different region. When the supply of milk reduces, as it has so significantly in recent years because of significant cost increases, the price would logically go up. Processors willing and able to pay more will attract milk. Those not willing to pay more lose milk to their competitors and will face a shrinking business. It’s all pretty simple, really. Some in the industry don’t seem to understand these economic basics, although most farmers do.

What would happen if some processors, and the media who parrots their views, got their way and milk prices fell by $2/kg or around 15c/L?

Disaster! There would be absolute carnage and milk production would probably halve across Australia in a few years. Is that the outcome that some processors want, or do they think farmers are magicians and can continue to produce milk while losing money?

Like it or not, the Australian dairy industry has contracted massively over recent decades, as a result of income being stripped from farmers. It is now an industry largely focussed on domestic demand and increasingly on domestic fresh milk. It is time for all to recognise this and stop living in the past.

Eric Danzi, CEO eastAUSmilk

Joe Bradley the new eastAUSmilk President, Tim Bale and Waylon Barron Vice Presidents

Joe Bradley was recently appointed to replace Matt Trace on the eastAUSmilk board. He also took over Matts position as president of eastUSmilk. Tim Bale and Waylon Barron were both elected vice presidents.

Matt has left the eastAUSmilk board due to potential conflicts it would create in his new role on the Australian Dairy Farmers (ADF) board. This is unfortunate but understandable. Matt has done an outstanding job as president of eastAUSmilk, and it has been impressive to watch Matt grow and develop his statesmanlike approach in the role of president and chair.

Matt will be lost to the board of eastAUSmilk but will be very useful to eastAUSmilk and our dairy farmer members in his new role at ADF. Anyone who knows Matt is well aware that he is a determined person who loves a fight and will be forthright and strategic in achieving outcomes for dairy farmers.

EastAUSmilk is very lucky to be able to replace Matt with Joe as president. Both are extremely capable and determined leaders who are passionate about dairy farming. I’m sure that Joe will do a fine job as president of eastAUSmilk. Joe is from Dayboro just north of Brisbane and is a person I have looked up to since joining the dairy industry and have regularly sought his advice and assistance. This is another occasion where Joe’s leadership was needed, and he is willing and able to step up.

Tim Bale is from Stewarts River near Port Macquarie in NSW. Tim has recently joined the eastAUSmilk board but has immense experience in many roles both within and outside the dairy industry. He is well known for central to the establishment of the farmers owned brand with Woolworths. Tim’s experience and knowledge will be invaluable to eastAUSmilk as vice president.

It’s also great to see Waylon Barron step up as vice president. Waylon is from the darling downs region in Queensland and is one of many dairy farmers who have become involved in eastAUSmilk over the past 6 years. He started on the darling downs district council, came onto the board just over 2 years ago and now has stepped up as vice president. Waylon is a very switched on and respected dairy farmer who I’m sure will adapt quickly to the role of vice president.

Congratulations to Joe, Tim and Waylon.

Eric Danzi, CEO eastAUSmilk.

Australian Dairy Farmers AGM and board elections

The Annual General Meeting (AGM) of Australian Dairy Farmers (ADF) is being held on 23 November 2023. This is a very important meeting where the future of the Australian dairy industry will be shaped.

Amongst the important issues in front of the meeting is appointment of a further dairy farmer to the ADF board. Currently Brian Tessmann from Queensland is a board member, but has not renominated. Matt Trace, a Queensland dairy farmer and president of eastAUSmilk, is the sole nominee, and if elected will be the sole voice for Queensland on the Board.

I encourage all dairy farmers to have their say at the meeting, if possible by joining the meeting – you will receive information from Australian Dairy Farmers about how to join. Those unable to join the meeting can vote online up to 2 days before the meeting – the deadline is 9.30 AM Queensland time on 21 November. Not only can you vote on a further farmer Board member, but also another five resolutions – including electing an independent director, alignment of ADF regions with RDP regions, and examining the organisation’s financial performance.

If you can’t make it, and can’t vote online before the meeting, please make sure you give your AGM proxy vote to a dairy farmer who will attend the meeting.

In the past, if Queensland farmers were giving someone a proxy we have encouraged them to give these to the eastAUSmilk president. However, Matt did not feel this was appropriate given he is seeking appointment to the ADF Board. The eastAUSmilk board has asked former Board member Joe Bradley to make himself available to collect proxies on behalf of eastAUSmilk members who want their vote to count but can’t participate. I encourage you to contact Joe about your proxy if you might not be able to vote. Joe is contactable on 0400 642 063.

Please do not let this important opportunity to have your say slip by – these decisions are very important. If you have any questions, please call any eastAUSmilk director, Joe Bradley or myself.

Eric Danzi, CEO eastAUSmilk.

Coles lifts milk prices, but Woolworths and Aldi haven’t yet

About 3 weeks ago, Coles quietly lifted the price of Coles milk on its shelves by 10c/L to $4.80 for 3L, $3.30 for 2L and $1.70 for 1L. This caught many in the industry by surprise and is seen a real positive move by Coles. It shows that the dark days of $1/L are a distant memory and it is time for everyone in the industry, including me, to move on from this.

It shows that Coles is adjusting the price on shelf as required to meet the cost of getting milk into their stores. The market is working like all other products which is all the industry ever wanted.

It also highlights that Coles is a market leader in paying farmers a fair price for the milk. Many of my members in southern NSW have made it clear to me that Coles has had a very positive impact on their business in the past 4 years. And the next 3 years are positive given the contracts they have with Coles in a time of considerable uncertainty with milk prices especially in southern Australia.

At this stage, Woolworths and Aldi have not lifted their milk price to match Coles. A logical question is why? Perhaps they are playing games to try and get some brownie points with consumers at the expense of the dairy industry but will lift prices in the coming weeks?

Or perhaps Woolworths and Aldi do not have the same cost pressures since they pay farmers less for their milk? I think in many areas of Australia, especially where Coles has direct supply with dairy farmers, this is very likely to be the case.

Whatever the reason, Woolworths and Aldi are very unlikely to be making more than a very small margin on milk. Matching the Coles price increases would be a welcome move by the industry and would allow price increases to farmers and processors for milk at a time when costs are increasing substantially. It would also allow processors to increase their brands wholesale prices to allow further small price increases to processors and farmers.

So Woolworths and Aldi, please help the dairy industry by matching the Coles price increase.

Eric Danzi, CEO eastAUSmilk.

Processors want the Dairy code of practice watered down

The code of practice has been in place for 3 years now and has had a significant impact on improving competition in the industry. It has created a fairer and more balanced bargaining between processors and farmers and this is exactly what the code was introduced for.

Farmer advocacy groups including eastAUSmilk and Australian Dairy farmers where key advocates for introducing the code whereas processing representatives tried to block the introduction of the code. A special thanks to Craig Hough from Australian Dairy Farmers who was key to drafting the code. Craig finished his time at Australian Dairy Farmers last week and his knowledge, drive for change and enthusiasm will be sorely missed.

Some processors are now complaining that the code does not give them enough flexibility when competition between processors drives the price to farmers up. These processors and their representatives want the code watered down so processors can reduce prices to farmers like the bad old days pre the code. This will allow processing companies worth billions of dollars to once again dictate to the small family farms that supply them. Their attitude is not surprising since processors were opposed to the code and have never wanted farmers to have any more bargaining power.

Some processors have competed well in the market to attract additional milk supply. The code has allowed this to happen much more readily than it was previously. Are these processors, who want to compete for and attract milk, also complaining that the code needs to be watered down? I would think not.

I would note that processors have identified the boundaries of the code and found out what they can and can’t do. In several areas, this means the intent of the code is not translated into practice. This appears a more significant issue to me than complaints by processors that small family businesses now have too much power over multi-billion dollar companies.

Eric Danzi, CEO eastAUSmilk.

Milk Price Increasing Painfully Slow

All processors have now released their starting milk prices for 2023/24 and both Bega and Lactalis have increased their price very slightly since. It is disappointing that prices have remained low and no processor appears keen to lift the price significantly to make it attractive for farmers to sign a contract. It is unclear why this is, but it appears that keeping the farmgate price low is more important to processors than picking up milk. It appears Norco has already signed a significant number of new suppliers while it doesn’t appear that Bega or Lactalis have signed many to date.

It is very difficult to tell what the average price is likely to be for each processor since all processors have an incentive to make their price look as good as possible rather than report accurate numbers. However, it is likely that Bega, Lactalis and Norco are all between 88 and 90c/L.

What is very clear is there are significant variations for individual farmers between processors due to different payment systems. This variation could be up to 6c/L on some farms which is an astonishing variation. As a result, it is extremely important for all farmers to get estimates of all processors before making decisions about their future.

All processors have moved to multi-year contracts now which will stifle milk price increases in the future. However, this makes it even more important for processors to compete for milk now and secure all the milk they can since they will not be able to attract milk for at least 2 years in the northern market.

It will be interesting to see if any processors make a decisive move re price to attract farmers signatures. Many farmers are waiting for this to occur and are unlikely to sign any contract until this happens.

Eric Danzi, CEO eastAUSmilk

eastAUSmilk board meets to plan future

Last week the eastAUSmilk board met to discuss critical issues facing dairy farmers and plan for the future. This is the second time the new board, which commenced on 1 January 2023, has met. The fresh faces on the board, with only 1 board member being on the board for longer than 18 months, is a real positive for eastAUSmilk. Also, the drive and passion to lead the dairy industry forward is clear within the board.

Some guests attended the board meeting including Terry McCosker from RCS who spoke about the potential for carbon farming in the dairy industry. Unfortunately, carbon farming does not make commercial sense for dairy farmers at this stage due to lack of scale, but this may change in the future. Rob Cooper discussed the NSW Dairy Action Plan, and it is positive to see the NSW government attempting to help the dairy industry move forward with a clear plan.

New eastAUSmilk government relations manager Mike Smith provided training for the board on the basics of lobbying given his many decades working in senior roles in government and lobbying government. Mike also discussed his government relations plan for eastAUSmilk which will set the foundation for the coming year.

The board also continued a strategic planning process where clear priorities were developed for eastAUSmilk for the next 3 years. Some of the highest priorities decided included the need to implement a proactive program around bobby calves. The downturn in the beef market this year has highlighted the importance of this. Another key priority is to assist farmers implement new technology on their farms to drive innovation, profitability, and growth for the industry.

The upcoming yearly contracting period between processors and farmers was front of mind for board members at the meeting also. A very interesting next few months awaits.

Eric Danzi, CEO eastAUSmilk

More positive times for dairy industry

The dairy industry has had many tough times over recent years. There was the drought that kept going, followed by devastating floods, ongoing wet and muddy conditions, and a massive increase in the cost of inputs.

However, in recent months there have been some significant positives. Although there has been some rain, weather conditions have generally been better in most regions over recent months. Hopefully this continues and we have a normal wet season coming up.

The cost of inputs has stopped rising rapidly and have fallen for some inputs. The price of some inputs including urea increased again after falling considerably. Hopefully, we can see a steady fall in key inputs including fertiliser, fuel, and grain over the coming months.

The milk price increased substantially in July and most farmers would likely receive between 85c and $1 per litre this year. This is a historically very high milk price and with a softening in input costs would lead to decent profits for most farmers.

So, what has been the impact of the changes on dairy farmers? Some farmers have still ceased dairying in recent months but the mass exodus that we saw, especially during the drought, has ended.

There are an increasing number of farmers spending money on their farms given the more positive times currently and expected in the future. Some farmers are buying cows in an attempt to rebuild herds and increase milk production to take advantage of higher prices. There are an increasing number of farmers investing in capital on their farms both machinery and sheds.

Many farmers are investigating whether to make large changes to farm infrastructure to make their farms more resilient to future weather events (both flooding and droughts). This would be a very large capital investment for most farmers so many are wanting more certainty over future milk pricing before making such huge investments.

There are more positive signs for the industry. Most farmers want clear commitments from processors to increase milk prices to at least $1/L in the next year and maintain the 15C/L for new milk for at 3 years. These clear signals will be required for farmers to pull the trigger on substantial investments leading to large increases in production. I expect that the potential new entrants to the dairy industry are wanting the same before investing.

Eric Danzi, Co-CEO eastAUSmilk

Kay Tommerup appointed to QFF board

Kay Tommerup is a dairy farmer from the Beaudesert area who recently joined the board of eastAUSmilk. Kay has considerable skills in a range of areas which she has used to diversify her dairy farming business over the years with her husband David. The Board and senior management of eastAUSmilk believe Kay’s skills and enthusiasm would be useful not only for eastAUSmilk but also QFF (Queensland Farmer’s Federation). As such, eastAUSmilk has appointed Kay as our QFF nominated Director.

I fully expect that Kay will use her skills and experience to assist and lead QFF forward over the coming years. I expect all at QFF will value Kay’s input and inspire QFF to move forward as an organisation.

It is vitally important for QFF to work in partnership with government to achieve outcomes for farmers and government. Developing partnership programs with government is a key area that we need to further enhance to ensure that farmers flourish in the new world. I expect Kay to be of great value in developing and implementing these partnership programs in many areas including water, natural resource management and animal welfare. In addition, addressing government red tape restrictions on farmers and industry marketing are key skills of Kay’s that I expect to be utilised by QFF to help achieve outcomes for all farmers.

QFF undertakes a range of activities on behalf of eastAUSmilk and farmers which often go unrecognised. In addition to the key areas above, QFF is very active in a range of areas including water management and pricing, natural resource management, biosecurity, and labour.

Good luck to Kay in her new role. I look forward to watching her help lead QFF forward over the coming years to ensure that QFF delivers new and innovative outcomes for all QFF farmers.

Eric Danzi, Co-CEO eastAUSmilk

Fairgo Dairy a raging success

Five years ago Shane Knuth from KAP led a campaign to get fairer prices for Queensland dairy farmers. As a result of this, the labour government funded the Fairgo Dairy project for QDO. The aim of this project was broadly around solving the problems of the dairy supply chain by specifically focusing on consumers and the retail sector given the negative impacts of $1/L milk on the dairy supply chain.

QDO utilised the funding to do a range of things. Most importantly, we ran a concerted consumer focused marketing campaign to destroy $1/L. This was an extremely successful campaign which started in late 2018 and gained tremendous consumer support and gained the attention of major media outlets Australia wide. In addition, retailers and politicians were acutely aware of what we were doing and became actively involved.

As a direct result of our campaign, $1/L milk ended in February 2019 thanks to Woolworths deciding that the time was right to lift their price to $1.10/L. A domino affect followed and all retailers matched Woolworths and milk processors were then able to lift their brand prices as well.

Fast forward three and half years to today and the retail milk price for retail brands is now $1.50-$1.60 a litre. $1/L is now buried in the past and will never return. Over the next year, further retail price increases will occur and a price of $1.70-$1.80 is expected to be the norm later this year or early next. The future is now much brighter for dairy farmers and processors around Australia.

None of this would have happened if Shane Knuth didn’t fight for a fair price for Queensland dairy farmers and if Minister Mark Furner didn’t fund the Fairgo Dairy project. All dairy farmers should be very grateful to Shane and Mark so thank you on their behalf.

Eric Danzi, co-CEO eastAUSmilk

Retail milk prices going up, but retailers and Dairy Farmers slow to move

Farmgate milk prices moved up significantly on 1 July with farmers receiving between an extra 15 and 20c/L. This was long overdue and reflects the increase in cost of production rather than giving farmers a significant profit. In future years, the price will need to continue to increase to allow farmers to make a reasonable profit or milk production will continue to decline.

At the retail level, prices started to move soon after 1 July as expected. Pauls moved very quickly to $4.00/L in both Coles and Woolworths stores and Norco also moved quickly to $4.10/L. These increases were as expected and in line with increases in farmgate prices.

However, no other retail milk prices have moved. Dairy Farmers are still at $3.55 in both Coles and Woolworths. Woolworths milk is still only $2.60 as is Coles milk. Farmers Owned is still only $3.20, which is lower than the $3.40 it was earlier in the year.

It would be expected that Dairy Farmers will lift to around $4/L but it is unclear when. Dairy Farmers owner Bega would be losing significant money selling at $3.55/L given the cost of purchasing milk off farmers has increased so significantly on 1 July.

Surely Coles and Woolworths will lift the price of their milk to at least $3.00/L but more likely $3.20/L in the coming weeks. This is not only in line with increases in farmgate prices in Queensland, but very similar increases in farmgate prices Australia wide. There is no justification for retailers leaving prices at $2.60 which is clearly a level at which retailers would be losing money. It is unclear whether retailers are in fact the ones taking this loss at present or whether the processors that package their milk are being forced to take a loss until retail prices move.

What is the impact of those brands, including Coles and Woolworths, not lifting their prices? These brands would be taking market share off those brands that have lifted prices. This is extremely bad for those negatively affected brands. Whether this is a conscious decision or not, those brands that haven’t lifted prices need to do so immediately to ensure that the dairy industry, both farmers and processors, can make a profit and remain viable.

Eric Danzi, Co-CEO eastAUSmilk

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

Dairy farmers need 90c/L to continue dairying

All major milk processors released their new milk contracts on 1 June. All processors announce significant increases in prices as expected with increases between 9 and 12c/L except farmers owned that has announced only a 5 c/L increase. All processors now pay between 80 and 85c/L on average.

Of the 3 major processors, Norco announced a potential 12 c/L increase which will see an average perhaps around 84 c/L. Lactalis announced a 9c/L with an expected average price around 81-82 c/L. DFMC who supply Bega announced a 10.5c/L increase that will see them average around 83c/L in southern Queensland. DFMC is expected to average around 81c/L in North Queensland in north Queensland.

Are farmers excited by the price increases? No. Will this be enough to stop exodus of farmers from the industry? No. The cost increases from fertiliser, chemicals, fuel and purchased feed over the past year are likely to more than swallow up the price increases. And the ongoing wet and muddy conditions will continue to hamper production and milk quality.

There are likely to be further increases during June and there needs to be. To get farmers excited and profitable again prices need to average at least 90c/L. anything less than this will see the exodus from the industry continue.

Farmers have time before they need to sign so do not sign anything yet. Get quotes from all processes to see who pays you the most since there will be significant variations between processors for individual farmers. Make it clear to processors that you need more to stay in the industry.

There is no spare milk in Australia to send to Queensland, so processors need Queensland milk. Processors need to demand money in the retail sector to remain profitable and pay farmers 90c/L or the spiral of falling milk supply will continue.

Eric Danzi – eastAUSmilk Co-CEO

Consider all milk contracts before signing

Milk processors are required to release their new milk contracts by 1 June. There has been a lot of discussion regarding these announcements and an expectation of a significant increase in milk prices given the increase in production costs, shortage of milk and ability for retail milk price to increase in response to cost increases.

Dairy farmers are in a very strong bargaining position and should utilise this to gain the maximum increase in milk price. This is a fork in the road moment for a lot of dairy farmers deciding whether they should stay in the industry or not. So no time is more critical to gain the highest price possible.

I urge all dairy farmers not to be rushed and explore your options with all processors before signing a contract. Given the milk shortages and cost increase, farmers should expect at least an additional 10c/L. Do not consider signing any contract with less than a 10c/L increase and without exploring all options.

The prices when announced are a weighted average only so you should request an income estimate for your individual milk supply. Be honest and realistic when providing the volume and milk quality parameters for the estimate so it can be as accurate as possible for you to consider.

Please let all your dairy farmer friends know of what they should expect and ensure they also shop around before signing a contract. Also be aware that if you sign a contract that you regret, you have a 14 day cooling off period where you can terminate your contract.

The ACCC has updated its guidance on some key elements of the Dairy Code. The updates provide more detail on the ACCC’s interpretation of the code’s ‘single document’ requirement, arrangements for cooperatives and collective bargaining groups, what constitutes a ‘material breach’, loyalty payments and other bonuses, and the requirement to publish dispute reports.

Eric Danzi – eastAUSmilk Co-CEO