Key points:
- Lactalis Australia has told dairy farmers it will drop farmgate milk prices by five cents in the next financial year
- EastAUSmilk is urging suppliers to meet with competitors as milk supplies dwindle
- Dairy farmers say the drop, combined with declining cattle prices, has many reconsidering their future
EastAUSmilk CEO Eric Danzi said farmers had expected an increase because in the last year, there had been a half-a-billion litre reduction in milk production around Australia.
Mr Danzi has strongly urged Lactalis suppliers to exercise their power and meet with other major processors.
Norco and Bega are yet to announce their milk price for the next financial year but are required to by law by June 1.
“I just can’t see them [competitors] actually decreasing the price,” Mr Danzi said.
“Realistically, anything under a three-cent increase is a tokenistic price rise, and I think many farmers would have believed even three cents isn’t enough.”
Dairy farmers consider their future
Peter Graham, a dairy farmer from Codrington in the Northern Rivers, said the announcement came as an “absolute shock” and would cost him around $65,000.
“It was something that none of us were prepared for … a drop was not even on our radar,” he said.
“The domestic market is at such a catastrophic downturn, there is no room for our domestic market to receive a drop.”
Mr Graham believes the price drop will make farmers stop and consider their futures.
“The amount of farmers that have closed their shops in the last two years, or even in the last twelve months, it’s been a gradual decline, exacerbated in the last six months with the higher livestock pricing,” he said.
“There are farmers there that are sitting on the edge, their cows were their asset, now their asset has halved in value, and now the milk price is down, where are we going to go next?
“How are we going to survive in the next twelve months?
“Things were starting to turn around, but then to have this little slap across the back of the head, it’s not a good indication for our industry that’s in a massive decline now.”
Calls for farmers to take back control
Mr Danzi said farmers had a massive amount of power to influence the price if they took control.
“Put the control back in the farmers hands about setting the price and not letting these silly Dutch auctions play out,” he said.
“They’ve been highly angered and motivated to look at other options.”
He believes the price is an attempt to suppress the price of milk to farmers in Queensland and northern New South Wales.
“They will believe by setting such a ridiculously low price, other processors may be stupid and follow that that lead,” he said.
Despite the good season for many in Queensland and NSW, Mr Danzi said the impact of flooding and increased costs had still seen many farmers exit the industry across Australia.
Consumer power
Mr Danzi says in the short term, consumers have little role to play in the negotiations, but in the longer term there needs to be further increases in prices on the retail shelf.
“Consumers need to understand that and support that because of the cost of production,” he said.
“I think there’s been a recognition the price has been ridiculously low for way too long and now we’re just starting to get back to more sensible sort of pricing on the shelf.”
The ABC has contacted Lactalis Australia for comment.
