Index does not go far enough

By Dairy News

STATE DAIRY farmer groups have claimed the federal Government’s new national Milk Price Index lacks vital information on processing costs.

The index was launched last month and aims to help farmers make decisions about their businesses.

Australian Dairy Farmers President, Terry Richardson, said the index was developed so that farmers have a more comprehensive understanding and are able to better interpret price signals.

The index will be supported by a one-year forecast of prices that will be updated quarterly, along with regular global, national and regional commentary.

A Regional, Retrospective Farmgate Milk Price Index will accompany the index, with farmers urged to provide price data via an online form.

“The purpose of the retrospective index is to help build a marker of actual prices received in each dairy region,” Mr Richardson said.

The Milk Price Index is being managed by the Department of Agriculture and Water Resources, with economic modelling and analysis conducted by Deloitte Access Economics.

Education material is being produced by RM Consulting Group, which will be delivered to farmers at dairy industry events.

However, NSW lobby group, Dairy Connect, called the Index ‘half-baked’, because it provides only a snapshot of dairy farm production data and not analysis of the farm-gate impact of the costs of processing.

CEO Shaugn Morgan said while the industry welcomed the initiative launched on July 6, the market analysis value of the Milk Price Index was diminished by what it did not deliver.

“Producers need transparency around processor manufacturing costs and their impact at the farm gate,” he said.

“Right now, we simply don’t have that information.”

United Dairyfarmers of Victoria President, Adam Jenkins, said the Index didn’t go far enough.

“With the index, we’ll have information about the world market and farm gate prices, but we’re still lacking transparency into manufacturing costs and their impact at the farm gate.

“UDV advocates for transparency throughout the entire supply chain and we are disappointed the milk price index does not achieve this.

“As an outcome of the Federal Government’s review of the index, we would like to see analysis of manufacturing costs to give farmers a clear idea of how the world price translates into farm gate milk prices.”

Fonterra Managing Director, Rene´ Dedoncker, is not surprised about the criticism, saying he believes it centres around the complexities of determining one milk price.

“On the index, it’s always valuable to have another perspective,” he said.

“I think the challenge is, everyone’s realising that this is not easy.

“If we had some magic, or a black box, that told us what the price should be, everyone would have it and I think the government has realised there’s a number of indicators that contribute to it but all they do is give you a range, a corridor where it should sit.

“So I think the reason people are disappointed is because it hasn’t unlocked it. I suspect we will find that it’s not something easy to unlock so I’m not surprised and I’m also not surprised at the reaction.”