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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.
How does a farmer use the Milk Exchange?
- Register as a seller. All sellers and buyers must register to operate on the exchange. The registration sets up an account for both buyers and sellers with ABNs and bank accounts. The registration also identifies the capability of the dairy farmers to supply the contracted milk volume and ability of the buyer to pay for the milk contract.
- Advertise milk for sale. The Milk Exchange team helps create a free 'Want to Sell' advertisement for the farmer. Buyers and sellers are anonymous, but the final sale price is published.
- A buyer makes an offer to the farmer for the milk. The offer is vetted and confirmed by the Milk Exchange before contracts are exchanged. Each milk contract has a start and end date. The advertising period completes one month before the contract is due to start supply to the buyer. The milk price is the amount payable for delivered milk based on the fat and protein components and quality.
- Milk pick up and delivery is organised by the Milk Exchange. The farmer still has only one truck arrive at the farm.
- Receive payment for the milk. Suppliers are paid into their nominated bank account on the 15th of the month. Each month the Milk Exchange will create a recipient-created tax invoice based on the monthly milk volume, milk components and quality - this payment is the same as typical traditional payments.
Use this form to register:
- Milk2Market offers weekly webinars for farmers wanting more information about the Milk Exchange.
- Website: https://www.milkexchange.com.au/
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