Despite record opening milk prices, dairy farmers are disappointed with the forecast end-of-season price.
The two dairy giants, Murray Goulburn and Fonterra have both opened strongly with record prices being offered to farmer from next week, (July 2014).
But the close of season price of $6.30 per kilogram of milk solids will be 10 per cent lower than what farmers get now ($6.80/kg).
Fonterra will offer Victorian and Tasmanian dairy farmers $5.80 per kilogram of milk solids as its average opening price.
Devondale Murray Goulburn has opened with $6.00 per kilogram of milk solids for its southern milk pool.
Gary Helou of Murray Goulburn says strong global demand for dairy ingredients led to high prices during the season, which had softened due to an increased supply from New Zealand, USA and Europe.
«Despite this softening we have been able to deliver the highest opening milk price on record and one of the highest year-end forecasts on record,» he says.
Fonterra Australia managing director Judith Swales says the global environment remains volatile but demand from ‘key importing countries’ remains strong.
«We will continue to provide suppliers guidance on developments in the market as they unfold,» Ms Swales says.
Murray Goulburn supplier and Northern Victorian dairy farmer, Andrew Wilson says it will hit his budget hard.
«I sort of grew this year, grew my production, went right out and had a bit of a go, then suddenly the price drops.»
«So in my own personal circumstance, my cow numbers and production I’ll drop in line with it just to try and cut my costs back because I just can’t keep going at a $6 milk price.»
Meanwhile in New South Wales prices will slightly improve with Murray Goulburn paying suppliers just over 54 cents per litre.
Softer global market: Rabobank
The prices are in line with Rabobank dairy analyst Sandy Chen’s expectations for a softer international dairy market.
«In the short-term we do see dairy commodity prices will be easing,» Mr Chen said.
«We actually made that call in December (the fourth quarter) last year, pointing to a gradual easing every quarter throughout 2014.
«And the main reason is the recovery in production in big producers like New Zealand and Europe, and to a lesser extent in the US.
«So this is happening now and at the same time the very significant increases in prices last year, demand has slowed down as well.
«2014 will be bearing the full brunt of all the little cumulative rises in prices throughout 2013.
«So there’s got to be some part of the demand being choked off, so we are seeing some slow down in demand.
«Basically what I’m talking about is we need the prices to be right, to lure the demand back.
«It’s not about demand not being there, it’s just at the right price.»
Pragmatic South Australian dairy farmers
Despite a forecast 10 per cent drop in end of season milk prices, South Australian farmers say the opening price is welcome.
Dairy South Australia chairman and Murray Goulburn supplier James Mann says cash up front is always a good thing.
«I think it’s round about where people were anticipating,» he says.
«Global trade’s come off a bit [so] it’s a reasonable result.
«To come out with a high opening price, with less step ups, I think makes it easier to budget and it’s good to have the cash between now and Christmas.»
Source: ABC