With the dairy supply chain reeling from climatic, geopolitical and economic pressures, the industry body representing Australia’s dairy farmers has described newly-announced milk prices for the coming financial year as a “conservative floor”.
Under the Dairy Code of Conduct, Australia’s dairy processors had a deadline of 2pm yesterday to announce the minimum prices they will pay to dairy farmers in the new financial year.
Australian Dairy Farmers (ADF) said the prices were a welcome starting point, as farmers and processors now have the rest of the month to sign agreements.
“As an opening price, this is a conservative floor, given the environment we’re operating in,” ADF President Ben Bennett said.
“It gives farmers something to work with as we head into what is traditionally a very busy time negotiating and looking for competitive uplift prior to the end of the month.”
Mr Bennett said it was important to recognise the pressures facing all parts of the dairy supply chain, not just farmers.
“Processors are hurting too,” he said. “We’re operating in a tight global environment and everyone in the supply chain needs to get a return.
“There’s no fat in the system at the moment.”
Mr Bennett said global and domestic conditions were continuing to shape the market, including ongoing uncertainty linked to conflict in the Middle East, which is contributing to volatility in key input costs such as fuel, fertiliser and freight.
“At the same time, international commodity markets and the Australian-US exchange rate are playing a significant role in underpinning farmgate pricing,” he said.
“Under those circumstances, we’re in a relatively sober position.”
Mr Bennett said seasonal conditions were also front of mind, with forecasts suggesting a strong El Niño could develop this year.
“That creates a level of trepidation across many dairy regions as farmers look ahead to the middle of the season,” he said.
“There’s a lot of uncertainty, and not a lot of comfort in the outlook right now.”
Mr Bennett said farmers would now turn their focus to negotiations and making practical business decisions based on the opening prices.
“We’ve got to make the best decisions for our businesses with what we’ve got in front of us,” he said.
“Farmers will sit down, look at their cost structures and make sensible calls about production, investment and staffing for the year ahead.”
He said persistent cost pressures could impact milk production, with some potential for contraction if conditions tighten further.
“We know input costs remain high, and that will continue to influence production decisions on farm,” he said. “That’s something the whole industry is watching closely.”