Questions around the failure to pass on the increasing value of global dairy trade to farmers and complex pricing structures were key topics at this year’s Dairy Australia Situation and Outlook breakfast.
A leading western Victorian dairy farmer has questioned the significant lag between Global Dairy Trade and farmgate prices.
And a Gippsland farmer called for processors to get rid of the average price, replacing it with a median figure.
Alanvale farm’s Garry Morrison said the GDT had gone up by nearly a third, in the last few years, to $4333 a tonne.
A Fonterra supplier, Mr Morrison asked the company’s managing director Rene Dedoncker why the processor’s estimated closing price, released a month ago, was still in the $5.60-$6.20 range.
“All that does is signal to the other processors,” Mr Morrison said.
“I am not a fool.
“How the hell can you come out and give that potential closing price, when for the last six months the average GDT has been the highest it’s been in six years?"
He said processors were still asking for farmers to trust them, yet better prices were not being passed through to farmers.
“You are not giving us the signals, to give us the price increases we need,” he said.
Mr Morrison said he was milking more than 3000 cows.
“I don’t think that when the prices are up they are flowing through to the farmers as they should," he said.
“If they want investment, we have to make money.”
Mr Dedoncker said processors also dealt with uncertainty.
“We have a lot of moving parts, in business, we need to manage as well,” Mr Dedoncker said.
The company had made some “regrettable” moves, in recent years, and wanted to avoid doing so again.
“Do we overthink some of this? Yes we do," he said.
“Do we wait until we have got more certainty? Yes we do.”
He said Fonterra had only just signed off on fixed contracts for the Japanese market.
“We have waited, as long as we could, to clarify and get confidence, around some of those positions," he said.
“The reality is I know you don’t like that, but that’s a reality for us.
“We have made an active choice, so it’s been intentional.”
Mr Dedoncker said he took advice from his commodity risk and trade and sales teams.
“I wouldn’t have changed that,” Mr Dedoncker said.
He said the company had sought to set up an “ecosystem”, which took risk out of the equation.
”We are trying to give ourselves more resilience and more opportunity, so that when we do get tough times, we don’t stand up and say ‘that’s a surprise, what are we going to do?”
Gippsland dairyfarmer, Chris Griffin, also called from more clarity around milk prices.
He applauded the United Dairyfarmers of Victoria push to clarify prices, saying it made a lot of sense.
But he said the loss of Murray Goulburn had caused greater uncertainty.
“That was the price setter, or the benchmark, for all companies for farmers to understand they were getting the price they should be getting, because they had a farmer board that was overseeing that,” Mr Griffin said.
"We haven’t got that now, in Victoria, so how do we, as farmers, know we are getting a true price for our product, now that the co-op is not there to benchmark off?
“We don’t know now because we haven’t got the oversight, we had previously.”