Improving price transparency

17 Jul, 2017 01:03 PM
Comments
1
 
But what farmers really want and need to know is what they can get paid for their milk...

THE opening price announcements by major milk processors in southern Australia have again been subject to accusations of ‘smoke and mirrors’.

Farmers and farming organisations have accused some companies of not being transparent in their announcements.

Others have pointed out that the ‘headline’ prices are available only to a select few.

Some others have suggested that changes in pricing calculations mean that the relativity of their farm’s pricing to the headline prices has changed.

The lack of clear price signals was one of the issues highlighted during last year’s dairy crisis.

The Federal Government promised $2 million to establish a commodity milk price index.

But I wonder if that is the best place to spend that money.

Everyone can already access information about movements in commodity prices.

The GlobalDairyTrade auction results are announced twice a month and provide a broad indicator of the movement in prices.

The major banks, Dairy Australia and local consultants also release information regularly about where the market sits.

But what farmers really want and need to know is what they can get paid for their milk at the farmgate from different processors.

They need to know what their milk is worth given how much they produce at different times of the year, their distance from the factory, their milk quality, their production components, whether they have locked into a supply contract etc.

I know farmers can — and probably should — get income estimates from different processors.

But this can be time-consuming, and it can difficult to ensure what is being provided by each processor is comparable.

I also know a consulting firm developed a program to do this about 10 years ago but it also faced challenges in ensuring the information being provided by companies was complete to ensure the comparisons were accurate.

My thoughts are a comparison website, let’s call it MyMilkPrice.com — along the lines of those provided for health insurance, energy and finance products — be developed with the funds from the Federal Government.

Farmers can go to the website and plug in their information, selecting the options that suit them (eg fixed contract or not), and be presented with the next season’s milk income (month by month) from different processors.

Processors could be encouraged to take part by providing an option at the end of the process for farmers to click on a link to contact them.

‘MyMilkPrice.com’ would also provide the opportunity for farmers considering system changes to estimate the impact of those on their potential income from different processors.

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READER COMMENTS

Jon Hauser
17/07/2017 2:17:03 PM, on Australian Dairyfarmer

Great Idea Carlene. It's a shame the industry was not prepared to fund this concept 8 years ago when Xcheque provided a working demonstration of exactly this concept - backed by detailed price models for a wide range of processors.

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