Milk processors roll out 2022/23 opening prices
While opening milk offers for the 2022/23 season have been solid, they still fall short of what is needed to help the industry's economic recovery, according to dairy farmer advocacy groups.
While early opening milk price announcements have set new records, soaring input costs, skilled labour shortages, and extreme weather conditions may prove too much for some dairy farmers who find themselves lured by exceptional land values or the relative simplicity of beef production.
The Dairy Mandatory Code of Conduct requires dairy processors to publish standard form milk supply agreements for the following financial year on their websites by June 1 at 2pm.
Minimum opening milk offers for the 2022/23 season, so far.
Milk Solids (MS)
Fonterra: $8.25/kgMS
Bulla: $8.30/kgMS
ADFC: Jul-Dec $8.40/kgMS, Jan-Jun $9.20, full year average payout $8.80/kgMS
Saputo: $8.50/kgMS
Lactalis: $8.80/kgMS (northern Victoria) and $8.65/kg/MS (western Victoria and Gippsland)
Beston: $8.75/kgMS
UDC: $8.50/kgMS
Goulburn Valley Creamery: $8.50/kgMS
DFMC: $10.96/kgMS (Far North Queensland); $11.21/kgMS (south-east Queensland); $10.71/kgMS (NSW); $8.64/kgMS (southern Victoria); $8.74/kgMS (northern Victoria); $8.87/kgMS (South Australia)
Cents a litre (c/L)
Norco: 83-85c/L
DFMC: 78.24c/L (Far North Queensland); 83.09c/L (south-east Queensland); 77.7c/L (NSW)
Gloucester, NSW, dairy farmer and eastAUSmilk vice-president Graham Forbes said while some of the price rises were substantial, they were not enough to cover input costs.
"Some input costs, such as fuel, have doubled, while fertiliser has increased by 250 per cent," he said.
"The challenges for farmers shortly will be input costs, the availability of products, rising interest rates, general inflation, and instability within the economy.
"Just last week, wheat hit $500 a tonne."
Mr Forbes milks a herd of 700-odd predominantly Holstein cows and supplies Norco.
He described it as "terrible" to see milk prices still at $1.30 a litre when they were the same price in 2011.
"No industry can sustain that,' he said.
"If we don't get the price up, the whole industry suffers.
"We've been pushing for a $2 a litre minimum price in supermarkets, which I don't think is unrealistic in today's world.
"Everything else has gone up in the supermarkets; nothing else has been held at a low price for so long."
Brian Cox, Meralyn Pastoral Co., Kerry, Queensland, supplies milk to Lactalis, South Brisbane.
The third-generation dairy farmer milks 120 Holstein and Holstein/Jersey cross cows.
"I think it is still early days, and I am hopeful that the price will increase as competition for milk increases,' he said.
Mr Cox said the Dairy Mandatory Code of Conduct had been positive for farmers and provided a sense of stability.
"I would like to think it rebalances the power between processors and farmers," he said.
"As farmers, we never knew what prices other companies were offering. Now the information is general knowledge.
"The Mandatory Code has been valuable because it gives us some certainty about our options."
Mr Cox spoke of the most significant challenges facing the dairy industry in the next 12-months.
"The weather has just been horrific, and we are not set up for this type of weather in Queensland or anywhere," he said.
"One Saturday night recently, I was walking around in the mud, getting rained on, and I thought, 'I don't know if we get paid enough for this'.
"I hope it will be recognised that there might be a milk shortage again this season."
Mr Cox believes more farmers may consider exiting the industry.
"For the last 12 to 18-months, it feels like dairy farmers have been exiting to beef," Mr Cox said.
"There's also a lot of competition for land at the moment.
"Speaking from a Queensland and northern NSW perspective, we are not seeing young farmers coming through.
"I'm in my 30s, and I could count other farmers the same age on the one hand, and I don't think there would be many, if any, in their 20s."
Soaring fertiliser, fuel and grain prices are also taking their toll on farm businesses.
"We have noticed that fertiliser has been going up for the last two to three years - all our inputs seem to be going the wrong way," Mr Cox said.
"We are choosing to weigh up if there are benefits to fertilising at the current prices.
"For the last five to10 years, we have constantly been seeking efficiencies to counter increasing costs and lagging milk price; yes, the price looks like it will move, but inflation and all our expenses seem to be moving faster.
"We're working on getting better and better, and we're running out of places to look for the cheap options.
"For many farmers, it won't matter what price they are offered for their milk, they could go to a dollar, and they're not interested.
"They have already decided they are exiting, so it is too little too late."
The latest Dairy Australia Situation and Outlook report has indicated that after successive seasons of recovering profitability, the net effect of rising fertiliser, fuel and grain costs on margins amid the conflict in Ukraine and ongoing COVID-19 disruptions is a crucial question as farmers and processors try to plan in a volatile market.
Dairy Australia's industry insights and analysis manager, John Droppert, said ongoing growth limitations and heightened margin risk are expected to offset good milk prices and favourable seasonal conditions, resulting in a comparatively flat milk pool totalling 8.6 billion litres nationally.
"The 2022/23 season will be marked by rising numbers throughout the supply chain - from production costs to farmgate prices, from commodity values to food expenditure," Mr Droppert said.
"Meanwhile, labour shortages remain a significant constraint, while high beef prices and soaring land values have enticed farmers and farmland away from dairy."