Greater Clarity Needed over Milk Pricing Strategies

AUSTRALIA - Victoria’s dairy farmers need greater transparency in dairy companies’ pricing structures in the wake of major cuts to their opening season milk prices.
calendar icon 10 July 2012
clock icon 2 minute read

The United Dairyfarmers of Victoria says the price cuts will mean the coming year will be very challenging for farmers, who must still seek to maximise their returns.

“Comparing company prices or even comparing payment options within a company is becoming increasingly difficult without professional assistance,” UDV President Kerry Callow said.

“Being able to translate these opening prices into very tight budgets is important for farmers to be able to manage their businesses.”

The price paid to dairy farmers for milk depends on a number of factors including product composition and the farm’s supply profile.

“Farmers then need to work through loyalty incentives, milk growth incentives and productivity incentives to determine actual budget estimates for the year – and at the moment that’s all very confusing,” Ms Callow said.

Major dairy companies in Victoria have announced opening season milk prices, ranging from $4.30 to $4.60 a kilogram of milk solids, representing around an 8 to 9 per cent drop on last year’s opening price.

Ms Callow said farmers understand milk prices had fallen on the back of a high Australian dollar and a surge in global supply.

“But as milk prices fall, processors are looking for more milk to maximise the efficiency of their plants.

“Farmers are asking if existing suppliers are being forced to accept a lower price so processors have the dollars to attract additional supply.

“And if that’s the case, we want to know when dairy farmers can expect to see the benefits of these efficiencies reflected through higher milk prices,” Ms Callow said.

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