Record milk prices paid last season may not be repeated this season, as opening offers from most processors are starting lower.
Processors are pointing to lower international commodity prices.
Under the Mandatory Dairy Code of Conduct processors were obliged to open with minimum prices by 2pm on June 1.
They can up their offer by the end of the month.
United Dairyfarmers of Victoria president Mark Billings described the openings as a good start, but said there were still a few weeks to go before the start of the new season and he hoped the processors would be able to bump up their offerings.
“I’d be happier with something with a ‘9’ in front of it, to make sure we have a sustainable industry,“ Mr Billings said.
“Three is still time for movement on price.”
He said improved prices would also give banks more confidence in dairy investment.
Australian Dairy Farmers president Rick Gladigau said farmers were enjoying the benefits of the Mandatory Dairy Code of Conduct hard-won by the national advocacy.
“Today, phones are running hot in the Australian dairy industry as processors announce their prices for farm gate milk for the coming season,” Mr Gladigau said on June 1.
“This has not always been the case.
“In the not-too-distant past, dairy farmers could be many weeks into the supply season, having their milk collected by a processor for an undisclosed price.
“Thanks to the Mandatory Dairy Code of Conduct, dairy farmers now have a month to consider processors’ offers, get milk price income estimations and sign an agreement.”
Bega chairman Barry Irvin said processors were facing lower international commodity prices, but they were competing in a market of declining milk volumes.
“These prices reflect competition for milk rather than the market,” Mr Irvin said.
“Markets are off by about 30 to 40 per cent, but competition is keeping the prices high.”
Bega has opened with $8.80/kg milk solids for northern Victorian suppliers, which is more than they opened with last year, but less than the season started with.
Mr Irvin noted that many of the prices offered were around the mid $8 mark.
He said Bega’s opening prices were still the second highest price ever offered.
Asked about the declining milk pool despite last season’s record high prices, Mr Irvin said it wasn’t so much dairy farmers not wanting to invest in dairy, but some dairy farmers had made decisions to try alternatives such as beef.
He described the opening prices as solid and healthy and with the prospect of competition, there may be some movement ahead.
Fonterra Australia announced an opening weighted average milk price for the 2023-24 season of $8.65/kg MS, compared to last year’s opening of $9.57/kg.
Fonterra Australia managing director René Dedoncker said Australian farm gate pricing for the season ahead remains higher than international commodity values, which have fallen by 17 per cent in the past year, however is supported by the strength of Fonterra Australia’s domestic business which comprises most of its revenue.
“Despite the decline in international prices, the outlook for dairy remains generally positive with global demand currently expected to lift in the medium-term, with only modest supply growth forecast in export regions,” he said.
Mr Dedoncker said Fonterra Australia’s business was well-placed to continue to deliver good returns.
Saputo Dairy Australia (SDA) announced its opening weighted average milk price of $8.90 to $9.05/kg MS for exclusive supply in the 2023-24 season, compared to last year’s initial opening of about $8.65/kg.
Milk prices for exclusive supply are available to suppliers in the northern region, south-west Victoria and South Australia region, Gippsland region and Tasmania (including King Island).
Saputo’s exclusive minimum milk price includes an additional 15¢/kg MS ($0.10/kg butterfat and $0.20/kg protein) above the non-exclusive minimum milk price to be offered in each region.
Norco Co-operative has announced a record farm gate milk price increase for its farmers.
The increase will see Norco’s 281 suppliers receive an additional 1.1¢/litre taking the average price to 88¢/litre ($0.88) — reflecting the highest farm gate milk price (on average) Norco dairy farmers have ever received.
Burra Foods has announced its opening range from $8.50 to $9/kg MS.
Chief executive officer Stewart Carson acknowledged this minimum price was a reduction on the current season.
“Whilst we are disappointed this is the case, we have considered the decreased value in global markets over the last 12 months and the growing un-competitiveness of Australian exports versus other countries,” Mr Carson said.
“Australia is the only country in the world that must set a minimum milk price for the next 13 months, yet trade in volatile markets.
“With the recently communicated restructure, Burra Foods is continuing to focus on improving productivity, reducing costs and optimising our product mix with an increasing domestic focus to maximise returns.
“Our successful launch into cream cheese this year has been further endorsed by the board supporting a capacity upgrade to the facility as we continue to focus on new premium markets and products.”
Bulla Dairy Foods opened with $8.80 to $9.60/kg MS in mid-May.
“With the current economic climate showing so much volatility and uncertainty, we believe we have opened with a strong and market-relevant opening price for the season ahead,” Bulla’s dairy and procurement manager Rohan Davies said.