Jersey Australia: Solid case for new milk price formula

The dairy breed group believes the current prevalent system of basing the farm gate milk price on individual values for fat and protein plus seasonal incentives less a volume charge is outdated and needs to be overhauled.

It has released a paper written by PBK Consulting director and former Australian Dairy Farmers Corporation chief executive Paul Kerr on milk pricing, following on from another report made public last October by consultant Patten Bridge, of Bridge Logic.

“Milk pricing mechanisms in southern Australia are unnecessarily complicated and do not always send the appropriate market signals,” Mr Kerr said in his report.

The Jersey Australia reports argue that various dairy end products, such as cheese, butter and milk powders, vary so widely in their fat and protein contents that basing the farm gate milk price on components did not accurately reflect market signals. Mr Kerr said a much simpler pricing system would benefit the dairy industry.

“Due to product mix in southern Australia, it is pointless trying to put a separate value on fat and protein and the focus should just be on milk solids for transparency and simplicity,” he said.

Jersey Australia board member and Tasmanian dairy farmer Jane Sykes said milk pricing had “really not changed since the 1980s”.

“We think change needs to happen,” Ms Sykes said. “Fonterra is changing its ratio (of fat to protein prices) from 2.5 to 1.9. But we’re after parity.”

She said Fonterra’s milk payment structure in New Zealand was based on milk solids while in Australia it was based on fat and protein contents.

She said Mondelez, which owned Cadbury’s, changed to a milk solids payment system last season.

“With the potential sale of Murray Goulburn, now is a good time to have this discussion to make the change,” she said.

United Dairyfarmers of Victoria president Adam Jenkins said a resolution at the organisation’s conference last year called for fat and protein ratios in milk prices to be reviewed given the global dairy market prices for various products had changed quite considerably in recent years.

Mr Jenkins said Jerseys had higher milk solids than Holsteins, so costs of genetics should be considered in making milk price changes.


Source: The Weekly Times


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