Their viability is essential to securing a thriving dairy industry and keeping manufacturing local.
Processors pay about $6.1 billion to dairy farmers annually and turn their precious raw milk into cheese, butter, milk and yoghurt loved by Australians and the world.
However, times are tough.
Dairy factories are closing. Others are reducing their footprint.
Our dairy products are not globally competitive.
Aussie dairy is being replaced on-shelf with cheaper imports.
Why are we talking about this?
Dairy processors cannot keep buying raw milk for more than it can be sold as a manufactured product.
It was a hard lesson they learnt this season when demand to fill factory capacity drove up milk price.
Processors’ goal is no longer to fill capacity. It is to secure their viability and keep the doors open — and in turn secure a sustainable dairy supply chain.
It’s a responsibility they take seriously because:
- Australian dairy processors directly employ 20,000 people.
- Almost 60 per cent are in regional Australia and a quarter in the highest job skill categories.
- Australian dairy processors are providing life-long careers and contributing to vibrant regional and rural communities — the local footy team, primary school and local businesses.
The regional contribution dairy processors make cannot be underestimated.
Dairy processors want to pay a fair price to the dairy farmers they work with.
This will not change.
However, the price paid must be sustainable so processors can remain economically viable.
We understand dairy farmers are also facing cost pressures.
This is why it’s essential the price paid to dairy farmers can be sustainably maintained for the year ahead.
What does this mean?
Dairy processors can’t change the cost of electricity and gas or influence the cost of production in international markets. They won’t compromise on quality and nutrition.
They are making tough decisions to protect jobs and the dairy products we know and love.
In the lead-up to opening farm gate milk price announcements, it’s important to understand how farm gate milk prices in Australia are determined and the variables at play.
By 2pm on Monday, June 3 (June 1 falls on Saturday), dairy farmers will have a month to assess milk price offers and contract terms from processors.
Dairy processors will develop their own view of what they will pay, with careful consideration to their product and market mix.
We expect to see raw milk demand more closely linked to market conditions.
The facts for financial year 2025:
- Seventy-one per cent of Australia’s milk production is trade exposed, competing with imports and exports.
- The spot Commodity Milk Value (CMV) is about $7.30/kg MS. About 30 per cent or $2 below the current weighted average Australian southern region farm gate milk price of $9.40/kg MS.
- Spot prices of major commodities have dropped during the past year.
- Dairy imports are up 17 per cent, impacting the competitiveness of locally produced products.
- Australian dairy exports have dropped about 17 per cent.
- At the start of the FY2024 season, there was a $3 or 30 per cent difference in farm gate milk prices between Australia and New Zealand. This now sits about 20 per cent or $2.
In the past 18 months, 11 dairy processing businesses have announced a closure. We must work together to better balance the risk across the supply chain.
We want a thriving dairy industry well into the future.
For more information, visit ADPF’s Milk Value Portal at: https://milkvalue.com.au
– John Williams is the Australian Dairy Products Federation chair.
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