Mixed response to milk price index

11 Jul, 2018 11:47 AM
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David Littleproud, Federal Agriculture minister, said the Milk Price Index would provide farmers with another tool, to help them find out about dairy prices.
We’re still lacking transparency into manufacturing costs and their impact at the farmgate.
David Littleproud, Federal Agriculture minister, said the Milk Price Index would provide farmers with another tool, to help them find out about dairy prices.

Dairyfarmers say the Federal Government’s new Milk Price Index is a good start, but processor’s costs need to be included in the new market information tool.

Agriculture Minister David Littleproud said the index would provide farmers with another source of dairy market information.

“Farmers will be able to see an index of commodity prices received by Australian dairy processors for cheese, butter, skim milk powder and whole milk powder exports,” Mr Littleproud said.

“There will also be a one-year forecast of prices that will be updated quarterly, along with regular global, national and regional commentary.”

The government was also funding an education program, on the use of the index.

Index positive

United Dairyfarmers of Victoria president Adam Jenkins said the index should allow farmers to make more informed judgements on the fairness and competitiveness of prices offered by their processor.

It would provide earlier, and clearer, pricing signals.

“The index will help farmers focus on the trends of the world market and how that aligns with the farmgate milk price,” Mr Jenkins said.

“The index allows farmers to track commodity prices received by Australian dairy processors.”

But he said the index would fall short of providing transparency in the processing sector.

“We’re still lacking transparency into manufacturing costs and their impact at the farmgate,” he said.

“UDV advocates for transparency throughout the entire supply chain and we are disappointed the index does not achieve this.”

He said any review of the index should give an analysis of manufacturing costs to give farmers a clear idea of how the world price translated into farmgate prices.

Educational material is being produced by RM Consulting Group, which will be delivered to farmers at dairy industry events.

Katunga, Vic, dairyfarmer Paul Stammers said he had entered his figures into the index but wouldn’t be updating it regularly, as he was on a fixed milk price.

“It would be better if there was an app,” Mr Stammers said.

“If they want more data, they could send us a reminder.”

He said he was interested in seeing processors’ cost of production.

Provide feedback

Karinjeet Singh-Mahil, Crossley, Vic, said the success of the index would depend on how many farmers used it.

“It’s a great idea, but we’ll have to wait and see how the education package works and if it drags more farmers into using it,” she said.

The index was one of a number of tools, including the Global Dairy Trade and Fresh Agenda’s dairy trade simulator, Global Dairy Directions, which needed to be considered by farmers.

“As people use it and provide feedback, that gives the opportunity to refine it and make it better," she said.

“Farmers have to use it and feedback their response, not bad mouth it off to their mates.”

Lachie Sutherland, Larpent, Vic, agreed without feedback, the index would not be of much value.

He welcomed the market commentary around supply and demand provided on the website.

“At least it’s something, which is better than nothing,” Mr Sutherland said.

“It will take a little bit of time for people to gain trust in it.”

He said the index should help farmers find out what their milk was worth.

‘We can sense whether we are being overpaid or underpaid.

“As we know, from recent history, it’s always important to know if we are being overpaid,” he said.

‘Half-baked’

But the chief executive of lobby group, Dairy Connect, described the index as ‘half-baked’ because it didn’t provide analysis of the farmgate impact of the costs of processing.

Shaughn Morgan said while the industry welcomed the initiative, its market analysis value was diminished by what it did not deliver.

“Producers need transparency around processor manufacturing costs and their impact at the farmgate,” he said.

“Right now, we simply don’t have that information.”

He said the Australian Competition and Consumer Commission had stated processors should publish information, “identifying how their pricing offers applied to a standardised set of model farms, accounting for common differences in farm size, seasonality of production, whether production is growing or retracting and how penalties, such as those relating to quality requirements, impact on pricing offers”.

Dairy Connect president Graham Forbes said producers needed access to whole-of-supply-chain analysis in order to build reliable future business strategies.

“Here we are months out since the ACCC published its final recommendations and we’re still waiting on the Federal Government to commit to implementing a mandatory code of conduct to regulate producer and processor relationships, which will deliver fairness and transparency,” Mr Forbes said.

“Now we have a milk price index of sorts, but our members are seriously questioning the impact of outcomes that had been set in train previously.”

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Andrew Miller

Andrew Miller

is a journalist for Stock and Land
Twitter: @journoandy26

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