JUNE 1 marks an important day in the diary of dairy farmers as under the Dairy Code of Conduct (‘The Code’) processors were required to release their minimum average price to be paid for the coming financial year. 

Whilst last year most of the processors had made their pricing announcement ahead of the day, this year Bulla was really the only processor to have released their price early - the Colac based ice-cream business making their announcement on May 17.

Therefore, most farmers were annoyed to be left waiting for the flurry of activity come the 2pm deadline. 

The processors were sluggish with the timing of their announcements, and the prices on offer weren’t particularly worth the wait.

Whilst the money on offer has actually been higher than the first offers made last year, processors don’t seem to be finding any more money to increase their initial prices significantly as they did last year. 

Saputo appeared to be the keenest of the larger processors, looking to recover some of the significant milk supply they have lost in recent years.

Their opening price was not anything special, being a range of $8.90 to $9.05, but the Canadian company is offering a 70c per kilo incentive payable on any increases in production. 

 Fonterra as we have come to expect were the lowball offer, opening the season at $8.65.

They have since joined the pack stepping up to $9.00, with their fresh milk price sitting at $10.70.

Very few farmers achieve the top fresh price, instead it is paid on a ‘locked in’ portion of the farms milk, and the lower general price paid on the balance.

The third major player, Bega, opened at $8.80 and increased their offering to $9.00 shortly thereafter.

Both Bulla and ADFC are appealing options for locals, with ADFC offering a weighted average of $9.40 (up from their initial offering of $9.05) and Bulla a range of $8.80 to $9.60, depending on the supply profile of milk. 

Bulla also announced a new peak to trough ratio bonus would be paid this season.

Others also offering above the major players include UDC at $9.20, ACM with a broad range of $8.69 to $9.52, KyValley with $9.20 and Lactalis at $9.30.

 South West Dairy Ltd (SWDL) was offering the flat rate of $9 per kilo of solids, with that price payable on both fat and protein, every day of the year.  

Opening prices of $9 plus for the second year in a row are record breaking for the region; however soaring input prices have rendered this price necessary.

Dairy farmers have been exiting the industry by the dozen and Australia’s milk production has fallen significantly. 

Prices- minimum, weighted average, opening and closing, exclusive, non-exclusive

ONE thing is clear from the milk madness; nothing is simple.

Farmers aren’t really even sure if the minimum price given at the start of June is actually the ‘opening price’ they will be paid, or if there will be another shuffling of the deck before everyone is signed up and locked in by the end of July at the latest.

The weighted average published by each company is still not based on anything other than their ‘best guess’ on what the price payable to their expected supply group might be.

There is no auditing of this process, so weighted averages are not a good comparison to draw between factories.  

Each processor offers a different contract, or contracts.

Most of the companies have gone down the lines of offering farmers two options; an exclusive supply agreement and a non-exclusive.

The processors were required to have a non-exclusive option under the Code.

However most have ‘gotten around this’ by having the price payable under their non-exclusive option much lower than their exclusive price. 

So who will get the milk? 

One thing is clear and working in the favour of farmers; there isn’t enough milk to go around.

Whilst at one point the Australian milk pool peaked in excess of 12 billion litres there was less than 9 billion produced last season and farmers fear this could even dip below eight billion litres. 

Strong land prices over the last two years have seen many sell with sheep and beef taking over dairying land across our region at an alarming rate.

With processors over the last decade demonstrating to farmers that they will only pay the bare minimum they have to secure the milk they need with no regard to the cost of producing the milk, many farmers are taking the opportunity to get out while cattle and land prices are good, instead of continuing to receive a bare minimum price.  

For the time being, milk processors continue to play a game of musical chairs; lose milk, up the price, repeat. The question will be; who will be left without milk once the music stops?