Jersey Australia will push for a shake-up of the country’s milk pricing system to make it simpler and fairer with more emphasis on the value of milk solids.
Jersey Australia believes the current payment system is outdated, complex, confusing and doesn’t accurately reflect the true component value of milk solids.
It has called for the system to better recognise the efficiencies and value generated through processing high density milk compared to low density milk.
Board member Jane Sykes said two reports commissioned by Jersey Australia and funded by Farming Together had shown pricing systems don’t necessarily represent the current market value of milk components, to the disadvantage of Jersey and other higher component farmers.
The reports found that higher component milk is 8.5c/kg Milk Solids or 0.6c/litre of milk cheaper for processors to cart and handle.
They found current milk price systems in Australia are complex and do not show transparency between the market value for milk products and the price paid to farmers for their components.
“It is reasonable to conclude that Jersey profile milk is relatively cheaper to collect and more efficient to process in relation to yields and handling costs than lower milk solids density milk,” the reports state. “There is value in high density milk which is not being recognised in the current payment systems, to the disadvantage of Jersey farmers.”
Ms Sykes said Australia’s payment system dates back to the 1980s. “What other industry hasn’t changed since the 80s? Back then fat was seen as the least desirable product and was priced accordingly. Over the past few years there have been major shifts in the milk market but our prices don’t reflect that.
“The fairest and simplest thing to do is make it a single price for milk solids, rather than individual ratios for fat and protein.”
Jersey Australia is advocating simpler milk payments with one price for milk solids, butterfat and protein and an appropriate volume charge that penalises lower solids milk.
Jersey Australia says it hopes to “start the conversation” about simpler and fairer milk prices. “We won’t be able to change it on our own; we need wider industry support and pressure at the farmer level,” Ms Sykes said.
“We understand not everyone is going to agree with the findings but we need to get the conversation started.”
Jersey Australia commissioned two reports looking at the value of components in milk pricing mechanisms used by the major processors.
The first report in October 2017 used farm data from Jersey and Holstein herds and compared actual prices received.
The subsequent March 2018 report found milk pricing mechanisms are unnecessarily complicated and do not always send appropriate market signals.
“Consumers are not buying components but finished products, such as cheese, that contain both fat and protein and therefore it is not relevant apply a value to either component,” it states.
Jersey Australia president Chris MacKenzie said the review was needed because Jersey and other high component herds were being unfairly disadvantaged.
“We believe this issue needs to be taken to the industry as a whole because payments are unbalanced and nothing has been done about it since competition payment came in,” Mr MacKenzie said.
“There is growing demand for butter but nothing has been done to reflect that in prices for farmers.”