Opening milk prices deemed unsustainable for dairy farmers
SA Dairyfarmers' Association president Robert Brokenshire said processors won't have a business without milk production.
After a delay in milk prices being announced due to June 1 falling on Saturday, processors have had an extension of time until midday today to let their suppliers know their financial fate.
Saputo has announced at $8 to $8.15 per kilogram of milk solids, while Beston has offered $7.80 to $8.10/kg MS and Bega has announced $7.90 to $8.20/kg MS this morning.
La Casa Del Formaggio's opening milk price is $8.21 to $9.98/kg MS, while Lactalis has announced $6.17 to $11.82 and UDC announced a $8.10 opening milk price.
SA Dairyfarmers Association president Robert Brokenshire said the opening milk prices from processors were "unsustainable".
"Dairyfarmers need more than $8.00/kg MS," he said.
"It's disappointing that some of the companies have chosen to open at such a low unsustainable milk price.
"There's a big variance between $8.10/kg MS and $9, and $8 to $8.50 is unsustainable for our dairy farmers."
He said dairyfarmers have had it tough enough over most of the last 20 years.
"We're just starting to recover and whilst export processes are finding it tough and imports are being arguably dumped into Australia, we still need a sustainable profitable milk price," he said.
"We're calling on processes to reassess their opening prices over the next couple of weeks realising that they don't have a business either if milk production is not available to them."
Rabobank believed Australia's dairyfarmers were "in reach" of a fifth consecutive year of overall profitability despite lower minimum farmgate milk prices forecasted for the season ahead.
In its recently-released Australian Dairy Seasonal Outlook 2024, Walking a Tightrope, Rabobank expected minimum farmgate milk prices across the southern Australian manufacturing pool to range between AUD 8.00 and AUD 8.20/kgMS for the season ahead, down approximately 11 per cent from the current pricing.
RaboResearch senior dairy analyst Michael Harvey said in a market short of milk - and with an ambition to build momentum around the current milk supply recovery in Australia - dairy companies needed to present sustainable milk price signals to suppliers in order to remain competitive.
"(But), Australia's milk supply recovery is ahead of schedule - with some excess volumes being channeled toward bulk ingredients and commodities, which are underperforming in local and export markets - meaning parts of the product mix are loss-making," he said.
"Meanwhile, the domestic market is delivering better returns for dairy following a period of hyperinflation across the grocery aisle, but consumers choosing to trade down as a result of cost-of-living pressures is negatively impacting the domestic retail channels.
"Global market uncertainties warrant a more conservative approach to minimum pricing."
He says the bank expects major input costs for feed production to "remain range-bound at lower prices" heading into the new dairy production season.
"Most purchased feed market indicators are trading below the five-year average, and good subsoil moisture levels on the east coast of Australia bode well for a strong winter crop planting and a neutral feed price outlook," he said.
"There is sticky cost inflation in other parts of the business, with Australia still fighting to bring inflation back under control.
"So there are ongoing cost pressures on-farm.
"Broadly though, cost inflation across the Australian economy should continue to moderate in the coming season."
Rabobank forecasts Australian milk production will finish the 2023/24 season 2.9pc higher with momentum expected to continue in 2024/25 to deliver expected growth of 1.5pc.
This would mark the first two consecutive seasons of milk supply growth since 2014/15.
The report said Australia's dairy sector had been a consistently strong performer in recent years and "remains a shining light".
"The average Australian dairy farm business has already banked consecutive seasons of above-benchmark profitability," Mr Harvey said.
"It hasn't been easy given the challenges associated with labour availability and cost inflation, but the sector has been profitable.
"Nonetheless, the outlook for Australian dairy farmer margins for the 2024/25 season remains positive, but it will require diligent budgeting and planning that, hopefully, underpins some longer-term investment."
Fleurieu Milk Company told Stock Journal they don't require any additional supply and long term contracts remained in place with their suppliers.
"There is a small step up on the farmgate price paid in 2023-24 but this was all documented in the previous contract," general manager Nick Hutchinson said.
"The 2024-25 average price is based on $10.64 per kg however we pay in cents per litre instead of kg/solids."