Casino dairyman and Dairy Connect board member Terry Toohey, Padua Park, says aggressive demand for fresh milk from the likes of Bega Cheese, which late last year acquired Lion Dairy, has forced other processors to keep up.
Producers that were with the likes of Lactalus have signed up with Bega in some cases on the back of a fraction of a cent per litre. Now Lactalus has come back with a better offer.
Historically milk was trucked north from Victoria to make up any shortfall in Queensland demand but with fewer producers remaining in the industry and better prices being paid for their fat and protein components, it is no longer viable to dilute northern NSW production with Victorian excess.
“The dynamics have changed,” Mr Toohey said.
“A lot of farms have exited the industry in Victoria. Where there used to be an easy decision to shunt milk north that supply is not there to be purchased and what there is comes at a higher cost.”
As a result producers in the north are increasingly confident that prices will remain strong, with farmgate sales pushing towards 80c/l.To take advantage of better prices farmers will need to breed more heifers, and for Mr Toohey, the use of sexed semen has increased his numbers.
“We have a lot more females than usual so rather than sell our excess heifers or older cows will might continue to milk them to boost volumes of new milk,” he said.
Mr Toohey is contracted to Lactalus, formerly Pauls, and as a result of Bega’s influence now has an agreement that includes a six cents a litre bonus for new milk delivered above and beyond his contracted volume.
That bonus price will increase to 15c/kg for new milk from January to July next year. It is the first time in many years that such a contractual clause has been included and highlights the urgency to secure supply.
Now that producers are being finally rewarded, it is the processors who are finding themselves squeezed by the three major supermarket chains, who have so far refused to budge on down, down fresh milk prices at the expense of an entire dairy industry.
“Consumers are willing to pay 10-20c/l more for their milk provided that money goes to the farmer, so why have they not moved?” asked Mr Toohey.
“The three chains – Aldi, Coles and Woolworths – are holding back.”