Input costs are squeezing dairy margins again

With the end of the drought and an improvement in farm gate milk price the dairy industry has been increasingly positive about its future.  But just when everything seems to be aligning the record increase in fertiliser, chemical and steel prices have dampened the mood.

While each individual has varying usage, efficiency and agronomy practices there is no doubt that the astronomical increases are chewing into the bottom line significantly.

I asked one of our Scenic Rim members Ross McInnes to have a look at the numbers. Some of the calculations of involving farm usage multiplied by the increase in urea prices on farm are showing an increase to cost of production of more than 3.5 cents per litre.

This does not take into account the price increases to many chemicals such as Glyphosphate or the significant increase to the price of steel for infrastructure and maintenance.  It’s quite realistic and not overstated to say on farm we are looking at an increase to the cost of production in excess of 5 cents per litre. 

This is unprecedented outside of a natural disaster such as drought and it seems there is little relief in sight. 

We are told this is a market reaction due to the increased price of gas used for urea production.  We are also told local production won’t make a difference as the urea price is set internationally.  Some are even suggesting this is a result of the new low carbon economy.  While we are investigating all of these issues at eastAUSmilk one thing is very clear for our farmers.  To continue to produce milk at current levels they will need good access to affordable fertiliser and chemicals very soon, or an increase to the farm gate milk price.

Matt Trace, President eastAUSmilk