ACM moves to give dairy farmers certainty

Tight times see dairy processor ACM offer a guaranteed floor price


Business Management
GUARANTEED PRICE: Australian Consolidated Milk's plant at Girgarre: the company has offered farmers a minimum price, for next season's supply.

GUARANTEED PRICE: Australian Consolidated Milk's plant at Girgarre: the company has offered farmers a minimum price, for next season's supply.

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ACM offers a guaranteed milk price, with possible step-ups

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Australian Consolidated Milk general manager – commercial Peter Jones says the company is offering dairy farmers price certainty, by offering a minimum $6.50 kilogram/milk solids for next season.

ACM has announced the $6.50kg/MS is a floor price, which is broken up into nine months of payments of $7kg/MS and $5.50kg/MS for the three spring months.

Mr Jones said the growing number of northern dairy farmers seeking to leave the industry was an issue and very distressing for all suppliers.

“Longer term we still see the region has a strong future,” Mr Jones said.

‘We hope our suppliers can turn around reasonably quickly, when the break comes. Hopefully it is sooner, rather than later.”

Autumn outlook

The announcement came as the Bureau of Meteorology released its updated 2019 Autumn Outlook, showing drier than average conditions were likely for large parts of northern and eastern Australia.

Warmer than average conditions are very likely for the entire country, on the back of what will be Australia's warmest summer on record.

The Bureau's long-range forecasting manager, Dr Andrew Watkins, acknowledged the outlook was not the news many would be wanting to hear.

"After a record hot December and January it won't come as a surprise that this summer will be our warmest on record, and apart from areas of northern Queensland, many locations fell short of their summer rainfall averages too," Dr Watkins said.

"Unfortunately, the outlook isn't giving a strong indication that we'll see a return to average or above average rainfall in many areas over the autumn period.

"Autumn is obviously a critical time of year for agriculture, particularly in the southern parts of the country.”

But he said it was important to remember, despite what the outlook was suggesting, individual heavy rainfall events were always possible.

The outlooks also show that warmer than average conditions were very likely to continue through autumn.

"If we have a look at what's driving the outlook, we can see that Australia's two main climate drivers in the El Niño–Southern Oscillation and the Indian Ocean Dipole are currently in a neutral phase, meaning there's no strong influence from either.

“But things have been warming in the tropical Pacific Ocean over the past month, so we are currently at El Nino Watch – meaning double the normal chance of an El Nino forming in autumn.”

Price step-up

Mr Jones said there was room for the price to move higher, mostly on spring supply, but the base price would allow suppliers to budget for the coming year.

“Some are making big decisions about the future now, so we are trying to give them some information to assist with their decision making process.”

He said an opening price would be available later in the season; at this stage it was forecast to be $6.70kg/MS.

“It’s more important than ever that our suppliers have a clear-line of sight when it comes to next season’s pricing,” Mr Jones said.

“This has been a tough season and high-water prices; fodder and grain have all put pressure on dairying businesses.”

The floor price for the 2019-20 season - starting July 1- will be available for current and new suppliers who sign-on by March 31.

“Our suppliers do not need to sign before the end of March, but if they do, they are protected with a guaranteed floor.

“Our suppliers who sign-on get the safety of the floor and should the open be higher, the higher price will become their guaranteed price, plus any increases or step-ups announced.”

Cash incentives

Northern Victorian suppliers have the option to bring their sign-on cash incentives forward to aid cash-flow this autumn.

This applies to new or current suppliers committing to ACM or those who last season took-out two-or-three-year pricing agreements.

Dry conditions are placing strain on budgets and ACM recognises this could hinder autumn pasture establishment.

Mr Jones said ACM would also offer a water support payment in March to all its northern suppliers.

This would be valued at 6c kg/MS of milk solids (4c kg/butterfat and 8c/kg protein) and applied to all milk supplied from July 2018 until the end of February 2019.

From March until June this year, the water support payment would be made monthly.

“Setting-up for next season is crucial, that’s why ACM is taking this payment out of its balance sheet to assist farmers,” Mr Jones said.

“This payment is not a loan and will not have to be paid-back to ACM, it is something we want to give suppliers and hopefully it eases some financial pressure.”

The story ACM moves to give dairy farmers certainty first appeared on Stock & Land.

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