Dairy farmers are facing a cut in next season’s milk prices as major processors announce their opening, minimum offers.
Citing declining commodity prices, the milk factories are framing their starting point at around $8 per kilogram of milk solids.
But farmers are saying the processors can’t expect milk volume to continue to rise at those prices.
Saputo Dairy Australia has announced its opening weighted average milk price of $8 to $8.15/kg MS for exclusive supply in the 2024-25 season.
SDA opened about $9/kg MS last year.
Fonterra has dropped its opening price to $8/kg, compared to last year’s opening at $9.20/kg.
Saputo has told its suppliers it can provide a range of tailored support and payment options, including a dairy investment rebate and milk cooling rebate to support on-farm infrastructure investment.
A flat monthly payment option is available to suppliers that prefer a consistent payment structure throughout the year and a growth payment of $0.70/kg MS on any net growth in a farm’s milk solids, as well as finance options.
SDA’s milk supply and planning director Kate Ryan said the company’s opening milk price “factors in ongoing global market volatility due to subdued demand, as well as greater variability in domestic markets and anticipated market returns”.
“As we see more market certainty, we would expect to review our prices during the year,” she said.
Fonterra Oceania managing director Rene Dedoncker said this price supports the scenario planning they have been undertaking with Australian farmers since November to prepare for a milk price that reflects the shift in market conditions.
“In recent years, our industry has seen higher commodity prices, stronger consumer demand and a shortage of milk to meet this demand,” he said.
“However, heading into financial year 2025, the global market for cheese, which is a strong contributor to our prices, has declined since the start of FY23.
“Cost of living pressures have led to softer domestic consumer demand and higher volumes of lower cost dairy imports.”
Mr Dedoncker assured suppliers that Fonterra Co-operative Group’s announcement that it is exploring divestment options for Fonterra in Australia has no impact on the business and they will continue to operate as usual.
UDV president, Bernie Free said the fact was, while dairy farmers’ prices will go down, their costs will go up.
“That will be at least four to five per cent due to inflation,” he said.
“Hopefully this is just their first, starting offer.
“This is just the minimum price. We might have some counter offers come through over the next month.”
Dairy Farmers Victoria president Mark Billing said the factories can’t expect milk volumes to hold up at the opening prices.
He said the major processors have lopped about $1/kg off the price, compared to the start of last year.
Under the mandatory dairy code, processors must publish their milk supply agreements, and a minimum opening price by 2pm on June 3. (Dairy News Australia will publish further prices as they are disclosed on our website.)
Processors can increase the price through the season.
Retrospective step-downs are banned.