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For the first time, dairy farmers can trade their milk on the online Milk Exchange next season.
This could help them better manage the market uncertainty created by the coronavirus crisis, Milk2Market head of corporate development Richard Lange said.
Farmers can also use Milk2Market's Milk Price Calculator to quickly compare prices available in their region from different processors.
There is no cost for farmers to use either of these services.
Mr Lange said the Milk Exchange allowed farmers to be a price setter.
Opening prices for next season were likely to be conservative, given the high level of market uncertainty and the new mandatory Dairy Code of Conduct contract and pricing requirements, he said.
Processors would then offer step ups if prices improved.
Under a traditional supply arrangement, dairy farmers inadvertently bore most of the risk by having to lock in for 12 months and hope that there would be increased prices as the season progressed.
But a farmer using the Milk Exchange could offer parcels of milk for a shorter period of time, potentially cashing in sooner on any upturn in the market.
A farmer could use a combination of contracts to maximise returns.
For example, they could sell parcels of milk on the exchange at a set price and sell the remaining milk under a traditional supply arrangement.
Mr Lange said this approach would allow farmers to be part of the spot market.
Dairy processors currently swap milk to balance out their requirements at different locations and at different times in the season.
Currently that spot market is operating at about $8.60 a kilogram milk solids, compared with an average price of about $7/kg MS.
"There is no reason farmers can be part of that," he said.
Mr Lange said the Milk Exchange also offered farmers the opportunity to sell to buyers from other regions or to specialised processors seeking smaller quantities of milk.
A farmer's milk would still be picked up by the one truck; the Milk Exchange would manage the transfer with the processors.
Gippsland-based consultant Matt Hall said the exchange would be particularly suitable for farmers offering milk with a difference.
This could include milk with certain components, such as a high fat milk, milk from a particular location for a particular market or milk on a specific supply curve.
"In the last 10 years the ways farmers are selling their milk has changed a lot," he said.
More farmers now search to find a supply agreement to maximise the milk price for their volume, quality and milk curve shape .
"I think the exchange is really giving farmers a way of contacting processors or milk buyers who are looking for a specific curve so they can pretty much negotiate their pricing system and contract," Mr Hall said.
It would also suit those with niche products.
"There could be smaller milk companies in the future who currently buy their milk from brokers behind the scene and they could easily buy through the milk exchange nearly directly from the farmer," he said.
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