I am watching the forecasts for 2016 Australian farmgate milk price with great interest. Dairy Step Up forecast as processors compete for milk.
Photo by Linda Faiers
It is well known that Australian dairy farmers see costs of production – labor, energy and quality feed for their cows as their biggest inputs cost challenge. High milk prices and low costs of production certainly mean happy days and provides the genuine quality of life for their families and their cows and necessary incentive to remain in business for the long haul.
Beyond the fairy tale it is also generally recognized Australia has one of the highest labour costs in the world and competing on costs of production alone in the world dairy stage is becoming almost impossible
At the moment Australian milk price forecasts are being predicted based on competition for milk supply between Australian milk processors rather than the traditional focus on international milk prices. Common sense says you can only pay what you can get out of the market place but then of course you cant sell what you don’t have!
Whilst I love to hear stories that sell hope rather than despair I would be very interested to hear from an industry financial whiz on the current maintain the farmgate milk price strategy irrespective of international markets .
Are these milk prices sustainable for Australian processors selling product into the international market place. Is this strategy likely to drag us into the black hole of Calcutta or will it truly fast-track us all on the road to the promised land?
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A FREE web-based tool that lets dairy farmers COMPARE milk prices across participating processors
One thought on “Dairy farmers making hay while the sun shines”
I have been fascinated by the statement that the Australian industry is dependent on the international milk prices. Any analysis shows that it is not true and the percentage of dairy production for export has dropped dramatically since the late 1990’s.
Further, Australia’s approach to the International market has been shown up by the Danes and the Kiwis.
I think the local milk price is being held up by good old competition for supply. Companies that have identified higher value markets in branded products such as flavoured milk, fresh milk for export by air and ice cream are doing well. They are competing at the farm gate for the milk and they are doing that independently of the international commodity price (best traced as Whole Milk Powder on the Global Dairy Trade Website).
The interesting thing about the Global Dairy Trade price of WMP is that it perfectly reflects the stock levels of WMP in China. The price went up, China invested in stock levels of unprecedented levels and the price went up further. Now it has settled again. There was a little gold rush – a ‘white gold’ rush. But the underlying fundamental market of supply and demand has remained reasonably unmoved. There is still a global deficit of dairy production and more importantly, in the Northern Dairy Industry of NSW and Qld, there is a local deficit.
My view is that the farm gate milk price will not move much while the local shortfall is in place. If the industry can continue the new International market approaches such as Lion and Norco, then the farm gate price will be further underpinned.
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