Recent comments by: Bernhard
Milk pricing needs to lift before October. Milk processors are saying words like the current milk price is aligned with world markets; it’s a prudent price a reasonable and responsible price. But that fails to take into account the risk in producing milk at the moment. That risk is not being shared equally between farmers and processors. Right now all the risk lies with the farmer.
If nothing changes the processors are paying a milk price that they know they will make a profit from with the product mix they produce and sell.
The same cannot be said for farmers. They will be losing money all the way through. So farmers are fully underwriting the profitability and strength of the processors at their own expense On-farm inputs and cost of production are going through the roof. At $5.80 farmers at best will be just breaking even through spring. With the reality, that the majority of farmers will be receiving a milk price below the headline $5.80 milk price.
When you have no cash flow or profit you have no ability to make any choices with regards the current crises in the dairy industry no matter what programs you dust of for farmers.
Milk production will fall off a cliff without a price increase right now of .25 cents /kg/ ms and farm exists will accelerate.
So I think it would be prudent for DA to focus on telling and sending a message to processors. To start sharing the risk of the raw product that drives their businesses. Are we really going to have a true partnership between farmers and processors?
It needs to start with fairer milk pricing. Start with that before telling farmers what they are well and truly aware of.
If MR Saputo thinks that by having his factories running at 97-98% utilization will help him get more milk into MG he is dreaming and does not understand the dynamics and what has got the Australian dairy industry to this point of collapse. By achieving those levels of factory processing efficiencies, he will have the least profitable farmers in the southern milk pool. They would of created a supply base with the highest on-farm cost profile along with the highest on-farm risk profile. They would need to pay a milk price premium of at least $1.00 kg/ms above the rest of the market. Does Saputo have the product mix that can justify that sort of factory efficiencies? When Saputo's product mix is basically value-add commodity products, not short self-life daily fresh products. Saputo and for that matter all processors need to have more focus on the on-farm cost structures and processes of their suppliers otherwise they will be building their business on some very unstable and weak foundations. It is not just paying the highest milk price with the only objective being your factory efficiency and highest profit when the exact opposite will be true for the farmers that supply milk to you. They may receive the highest price but be the least profitable in the southern milk pool. Running at 70% plant utilization just might grow your milk pool along with the rest of the industry that would better share the risk and profit from that milk. Something to think about.