Milk Price Speculation and Blame Mounts
Market Developments
According to eastAUmilk CEO Eric Danzi, the recent uplift in global dairy prices at GDT events coupled with favorable exchange rates for exporters should lead to an increase in farmgate prices. Danzi has issued a challenge to processors to elevate milk prices to $10 per kgMS by July, and has even suggested $12 per kgMS could be within reach.
Industry Reactions
Rabobank senior dairy analyst Michael Harvey is optimistic about the potential for price increases before the end of the 2024/25 season, driven by a significant rebound in global commodity values and a weaker Australian dollar. However, he cautions that farmgate prices may not hit $9 per kgMS this season, though progress is being made in the right direction.
United Dairyfarmers of Victoria president Bernie Free highlighted the influence processors have over milk pricing, citing concerns that the Dairy Code of Conduct offers insufficient negotiating power to dairy farmers. He calls for a revision of the code to ensure more equitable terms.
Alternatives to Step-Ups
National Milk managing director Scott Briggs from Victoria emphasizes the need to explore alternatives to step-ups in pricing, noting the complexities of understanding milk's 'true value' within Australia, especially given that most milk is sold domestically on fixed-term contracts.
In other markets, adjustable monthly pricing supported by risk management tools is common, offering greater flexibility in responding to market changes.
