Global Dairy Trade: Farmer Power’s Garry Kerr calls for strong opening prices
As global prices slip for the fifth week, Farmer Power’s Garry Kerr says processors shouldn’t hide behind international trade ahead of the June 1 deadline.
A drop in international dairy trade should not be used by processors as an excuse to keep opening prices low, a farm lobby leader says.
Commodity prices continued on a downward trajectory in the latest Global Dairy Trade auction held overnight on Tuesday, albeit not as dramatically as a fortnight ago.
The GDT headline figure dropped 2.9 per cent to sit at $US4432 ($A6306) with the whole milk powder category falling even further — a drop of 4.9 per cent to $US3934 ($A5598).
Farmer Power chief executive Garry Kerr said given milk supply was tightening nationwide, the latest GDT figures were not the whole picture.
“We’ve had floods in Queensland and NSW. The dairy farmers there are still trying to get back on their feet. Input costs are at record highs,” he said.
“We’re looking at prices of $8.50 (per kg milk solids) roughly at the moment. That’s a start but it needs to get up to $9, otherwise you’re going to see more dairy farmers leave the industry and who could blame them?”
Last week, Fonterra opened with an weighted average farmgate milk price of $8.25 per kg milk solids for the 2022-23 season.
Bulla was the first processor out of the 2022-23 starting blocks, confirming in March an opening price of $7.40 to $8.00 per kg milk solids.
Bega was the second processor to join the fray last month with an opening milk price in the range of $8.20 to $8.60 per kg milk solids.
All processors have until June 1 to make their opening prices public as part of the mandatory dairy code of conduct.
Mr Kerr noted while meat, fruit and vegetables had all risen in retail price in the past month, milk prices were static.
“The price of the supermarket branded milk is being kept artificially low,” he said.
“There’s been a real lack of discussion about the future of the dairy industry in this election campaign. I bet you if Labor gets in on Saturday, the Coalition will blame them for the coming dairy crisis and if the Coalition is re-elected, Labor will have a go at them for being asleep about dairy. The truth is both sides haven’t addressed the problem.”
MAY 4: FIGURES DECLINE ONLY WEEKS AHEAD OF OPENING PRICES
A key index for international dairy trade posted its steepest decline this calendar year — just as Australia’s milk processors are working to determine opening prices.
The Global Dairy Trade headline figure decline plunged 8.5 per cent overnight, the fourth and most substantial drop for 2022.
The biggest drop was in the butter category, which fell 12.5 per cent to an average $US5807 ($A8176) per megatonne.
Butter has endured a cumulative drop of more than $US1200/MT ($A1690), from a record high of $US7048/MT ($A9924) in early March trade.
Whole milk powder fell 6.5 per cent, on the back of a 4.4 per cent decline in the previous event, to an average $US3916/MT ($A5514).
The whole milk index has now dropped $US841/MT ($A1184) since also reaching a record high of $US4757/MT ($A6698) at the start of last month.
The international trade figures are still far higher than this time last year but occur at a critical time for the Australian dairy sector with processors required to publish their opening prices for the 2022-23 season on June 1.
Over the Tasman where the GDT index also plays a role at the farmgate, NZX senior analyst Amy Castleton said while a drop was expected, the magnitude of the decline was surprising.
“It seems buyers have finally decided they’ve had enough of high prices,” she said.
Westpac acting chief economist Michael Gordon offered some consolation for dairy farmers ahead of the new season.
“Looking beyond the next few auctions, we expect prices to remain high on strong market fundamentals,” he said.
“However, there is uncertainty around when China’s Omicron wave passes and in turn when Chinese dairy demand recovers.”