NSW dairy leader Graham Forbes predicts dairy price trend
It’s fast becoming a reality that the price of generic milk may hit $2 a litre – which is still ‘cheap’ according to a NSW dairy leader.
The price of generic milk may hit $2 a litre by the end of they year, matching a prediction by a NSW dairy leader.
In March, eastAUSmilk vice chairman Graham Forbes said $2 a litre for generic milk was needed to cover the cost of primary production.
“Two dollars a litre for milk is still very cheap,” Mr Forbes said in March.
“You pay more per litre for soft drink or sparkling water. Throughout the dollar-a-litre years, we were always were pretty reasonable. We’d say $1.40 a litre or $1.50 a litre was about where the price needed to be.”
In July, Aldi, Coles and Woolworths all raised the price of generic milk from $1.35 to $1.60 for one litre containers, while a two-litre bottle had a price hike from $2.60 to $3.10.
Fast forward to November, and Mr Forbes said inflationary pressures meant his March prediction was likely to come true in coming months.
“People laughed at the time about raising the price to $2 a litre,” he said.
“But it’s looking like it could happen sooner rather than later.
“Electricity prices are going through the roof and the floods have had a huge impact on dairy delivery in both NSW and Victoria.”
Generic milk at $1 a litre was introduced by Coles and Woolworths in January 2011 and lasted until 2018, when both raised prices to $1.10, then $1.20 a litre the following year.
United Dairyfarmers of Victoria president Mark Billing said $2 a litre for generic milk reflected market realities.
“We often said during the dollar a litre debate that if prices really reflected inflation, then it would have been two dollars years ago,” he said.
“Horticulture adjusts their prices pretty quickly with fruit and veg and rightly so. We can’t live on with fantasy prices when the reality is that making milk is much more expensive than it was at the start of the year.”
Norco price offer not reflecting costs
THIS week's price-increase offer from dairy co-operative Norco to its drinking milk suppliers won't go far enough to stop the exit of producers from the industry, says Gloucester dairyman and vice-chair of lobby group eastAUSmilk.
The Norco announcement of a 5 cents a litre co-operative premium payment for the next two months - coming on top of average base milk prices of around 70c/l - pales in comparison to what is needed in the wake of "unprecedented inflation" for farm inputs, he said.
"This is not a base price payment," he said, pointing out the premium equated to 0.7c/l for a 12 month period. "Norco has not lifted the base price."
Mr Forbes said the dairy community were frustrated by Bega's recent offer of 6c/l for central NSW and a paltry 5c/l for Queensland drinking milk suppliers, considering the component price of southern dairy farmers had soared $150/kg (about 12-14c/l) on the back of better world commodity prices.
There was some expectation from Parmalat suppliers that they might receive a substantial increase in the order of 12-15c/l to meet the rise of doing business but in the wake of Bega's offer that hope has been diminished.
"We have always been told that the Queensland drinking milk price should be based on the Victorian price plus freight," said Mr Forbes. "If we don't go to 15-20c/l more for our milk we will lose farmers in droves."
Farmers are now calling on supermarkets to raise the price of milk to $2/l to guarantee production of local fresh dairy.
Federal Government commitment to a Dairy Symposium and Digital Dairy Platform announced
The commitment by the Federal Minister for Agriculture David Littleproud to hold a dairy symposium after the upcoming Federal election is welcomed by eastAUSmilk.
This announcement followed on a meeting between the President of eastAUSmilk, Matt Trace, with the Deputy Prime Minister Barnaby Joyce at a recent dairy farmer meeting at Muswellbrook NSW in early April where Matt raised with the DPM the holding of a dairy symposium.
Minister Littleproud also met with dairy farmers at Singleton NSW on 20 April with eastAUSmilk Vice President Graham Forbes and during an interview on the NSW Country Hour later that day, discussed the importance of a dairy symposium. You may listen to the interview at ABC Country Hour
Barnaby Joyce convened the 1st dairy summit after the 2016 federal election which brought together dairy stakeholders to consider issues confronting the industry due to the collapse of Murray Goulburn and the then clawback of dairy payments to dairy farmers.
The time was right for a look back over the past years since the initial dairy symposium in August 2016 and to determine what has occurred since that time and find out what has worked and what needs further review.
In reference to the symposium, Matt indicated that the dairy industry needs to find further solutions to the issues that confront those players within the dairy value-chain, particularly given the market failure within the industry and which was highlighted in the ACCC's report into the dairy industry.
The development of the dairy mandatory code of conduct, which can trace its beginnings to the 2016 dairy symposium, was the beginning of the restoration of trust and transparency in the relationship between the dairy farmer and processor.
Further discussion needs to now occur around the relationship of the supermarket within the dairy value chain.
Co-CEO of eastAUSmilk, Shaughn Morgan, has indicated that the Code has a few more steps to enhance its ability to provide the trust and transparency required.
The dairy symposium provides a place for that to occur.
The Federal Minister for Agriculture has also announced today the development of a digital platform to assist dairy farmers being provided with up-to-date information regarding value, price and other relevant dairy data.
The development of this digital platform in conjunction with the Dairy Code and the Milk Value Portal are beginning to provide dairy farmers with a suite of dairy products that will assist them in addressing the many varied issues that they are confronting daily.
This will also lead to further discussion of supermarkets being subject to the Dairy Code given the apparent 'inadequacy' of the Food and Grocery Code to provide appropriate oversight of supermarkets and their relationships with fresh food suppliers.
With the announcement and commitment today by Minister Littleproud, eastAUSmilk looks forward to being a part of providing the solutions with the other dairy bodies to stop the decline of the number of Aussie dairy farms and in finding a way to rebuild the strength and resilience of dairy farmers generally.
Dairy leader calls for Woolworths, Coles and Aldi to raise milk prices
Australian shoppers will need to pay two dollars a litre for generic milk in order to keep farms viable, a dairy leader says.
eastAUSmilk vice chairman Graham Forbes said two dollars a litre was still lower than most industrialised countries and below prices set for soft drink and bottled water.
He said historically low prices for milk - a hangover from the dollar-a-litre 2010s — were unsustainable.
“Two dollars a litre for milk is still very cheap. You pay more per litre for soft drink or sparkling water,” Mr Forbes said.
“Throughout the dollar-a-litre years, we were always were pretty reasonable. We’d say $1.40 a litre or $1.50 a litre was about where the price needed to be.
“But the economy has shifted in the past few months. Inflation is running and the dairy industry needs to keep up, otherwise you’re producing milk for hardly any return.
“Labour costs are high due to worker shortages. Fuel, as we all know, is far more expensive than it was at the start of the year. Two dollars a litre for generic milk is still reasonable in the bigger scheme of things.”
The dollar-a-litre milk push was introduced by Coles and Woolworths in January 2011 and lasted eight years until it rose incrementally to $1.10 a litre.
Along with Aldi, Australia’s big three supermarkets quietly increased the price of generic milk to $1.30 just prior to Christmas, although fuel costs have skyrocketed since that time.
A Coles spokeswoman said the supermarket had: “moved to source Coles Brand milk via a direct sourcing model in some regions and therefore, we are able to pay farmers directly in those regions.
“We believe this model delivers fair and competitive prices to farmers, provides greater certainty of income, and allows farmers to more confidently plan for their future,” she said.
A Woolworths spokeswoman said: “We offer our customers a wide range of milk at different prices to suit household budgets and we are particularly mindful of cost of living pressures for Australian families.
“As a result of increasing farmgate price movements, we’ve accepted millions of dollars in wholesale cost increases from our processors in recent years.”
Both Coles and Woolworths pointed to their dairy funding initatives which has provided more than $5 million and $2 million in farm grants respectively.
Aldi did not respond to The Weekly Times request for comment.
The call for milk prices to rise at the checkout is not contained to Australia.
Last week, the head of the UK’s largest dairy company called for British shoppers to pay more for liquid milk.
“(Raising the price of milk is) even more critical by the fact that the costs of producing milk are increasing like never before,” he said.
Woolies drought package call leaves unresolved dairy issues hanging…
Woolworths today announced that it will end its dairy producer drought payment program on 30 June leaving a number of industry issues unresolved, according to advocacy group eastAUSmilk.
EastAUSmilk President Matt Trace said the extra drought levy payment was intended as a temporary measure when it was introduced in 2018.
It has played an important and beneficial role for dairy farmers since its introduction and this benefit should be acknowledged.
"Importantly, Woolworths has stated that they will provide more "timely support for farmers through existing milk purchase arrangements" with the development of a "new mechanism" if extreme conditions that occurred in 2018 should arise again. We look forward to being a part of any discussions that improve the response time to address such critical issues when they arise," Matt Trace said.
"While the retailers drought levy provided support for many dairy farmers during difficult financial times during the past years, there remain a number of challenges that the industry faces that need to be addressed and resolved.
"The farm-gate price may be improved for many dairy farmers but others continue to face financial and on-farm pressures," Matt said.
The processors who currently supply milk to Woolies for their home-brand label are Bega, Fonterra and Lactalis.
“Lactalis has indicated in a letter to their dairy farmer suppliers that they will continue to provide this payment as part of their farm-gate price until June 2022 and they further stated that the payment will continue in the coming seasons for Queensland dairy farmers and likewise in other States," eastAUSmilk Vice President Graham Forbes said.
"This is a positive announcement by Lactalis and it is hoped that other processors will make similar public announcements.
"However, substantial challenges to the long-term sustainability of the dairy industry remained on the radar.
"In recent years the issue of ‘market failure’ continues to be of concern within the dairy industry and which has been highlighted by the ACCC in its published reports," he said.
"There is also the on-going negative impact that increasing input costs are having on farm-gate prices, such as the spiralling cost of fertiliser and diesel, which have doubled in price during the past 12 months.
EastAUSmilk Co-CEO Shaughn Morgan said that the timing of the announcement by Woolworths will allow the 'good faith' provisions of the Mandatory Code to be tested, especially as the new milk year commences.
"It is vital that future generations of dairy farmers be provided with a strong basis to grow their dairy farms and ensure long-term sustainability, with the Code assisting in maintaining that viability.
"The Federal election also provides an opportunity for the Government and Opposition to commit to supporting dairy farmers through progressive election promises that will ensure growth within the dairy industry through, for instance, enhancing the Mandatory Code.
"EastAUSmilk looks forward to having those discussions with the relevant Ministers and staff in the coming weeks and months as the Federal election draws near," Shaughn concluded.
Matthew Trace, President, eastAUSmilk
Graham Forbes, Vice-President, eastAUSmilk
Shaughn Morgan, Co-CEO, eastAUSmilk