![Farm gate milk prices have been announced and it's time for farmers to compare what's on offer. Farm gate milk prices have been announced and it's time for farmers to compare what's on offer.](/images/transform/v1/crop/frm/silverstone-agfeed/2058912.jpg/r0_0_1024_683_w1200_h678_fmax.jpg)
Australia's dairy milk processors had up to June 1 2023 to announce their opening farm gate price to suppliers and non-suppliers for the new financial year.
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Some got in early, others left it until the final hours (or the final hour) to make public their offers to farmers.
Invariably, the FY24 offers announced by the deadline on June 1 were lower than farmers received in FY23, reflecting global market shifts.
On May 16, the price of cheddar dropped 3.4 per cent, after a similar rise in the previous month. Overall, the global Cheddar Price Index is expected to continue to drop over this year.
Butter value also contracted last week.
Milk processors offset the lower returns on liquid milk at the retail end of the supply chain, against better financial returns on higher value products like butter and cheese.
In the lead up to June 1, there were expectations these global values would affect the offers from Australia's milk processors.
Globally and nationally, milk supply is contracting. This is due to a number of factors, including the cost of entering the industry (land prices), supply chain issues that have seen input costs rise steadily, workforce shortages, and activists against animal agriculture seeking to affect political and consumer ideology.
One aspect that the Australian dairy industry can guarantee to its customers is provenance - the story of healthy pasture grazing is a strong one globally.
The security of the Australian dairy industry is the legal requirement for processors to announce the minimum price farmers should expect to be paid for the forecast financial year.
Consultants say now is the time for Australia's dairy farmers to hunker down with their calculators and financial and farm advisors, and make decisions about expanding or contracting their business, diversifying, maintaining the status quo, or leaving the industry.
On offer is a range of prices based on volume, milk solids, butterfat and protein. For some processors, there is significant variation in price offered based on whether a farmer signs contracts for exclusive or non-exclusive supply.
There are also premiums paid for by some processors for organic milk.
And farmers will be comparing 'apples with oranges' because some processors offered dollar values and others offered solids prices. Some processors' offerings vary according to which region their farmer suppliers are in.
Offers climbed up to and over $10/kgMS
Bulla Dairy Foods was an early bolter, throwing down a challenging midpoint $9.20/kg Milk Solids, off an offer that ranged from $8.80-$9.60/kgMS.
This offer reached the estimates that dairy analysts had been demanding in the leadup weeks to June 1. A $9/kgMS offer was considered reasonable.
Bulla Dairy Foods CEO Allan Hood said the company was making a conservative offer, citing lower international price benchmarks that were affecting margins.
Bulla's opening milk price was $0.60c/kgMS down on FY23, equivalent to a seven per cent cut at the farm gate.
United Dairyfarmers of Victoria president Mark Billing said a similar drop from other dairy processors - reducing a farmer's competitive advantage of negotiating a higher price, could lead to farmers leaving the industry and further shrinking the milk pool.
Lactalis was also public early, a couple of days before the deadline, announcing a price of $0.82/litre farm gate price for milk.
But the announcement came with a codicil. This was the opening milk price, and dairy farmers could expect to see movement - upwards - through the year.
Upwards movement can't come soon enough for ironclad Lactalis suppliers.
EastAUSmilk CEO Eric Danzi said the price offer was a potential $60,000 lower income offer to farmers' FY23 price (which was $0.87/litre), depending on their production figures.
Lactalis buys milk from Queensland and northern NSW suppliers.
Its direct competitor, Norco, came out with a higher offer at $0.88/litre.
Underpinning the offer from Norco is a strategy by the cooperatives members to diversify asset and capital investment, which in turn diversifies financial returns.
Mr Danzi said Lactalis and Norco are competing with Victorian-based milk processing companies that are prepared to wear the cost of transport to buy milk at the farm gate in northern NSW and Queensland.
The large volume processors made varying offers
Saputo Dairy Australia announced its farm gate price to suppliers will be weighted between $8.90-$9.05/kgMS.
Milk prices for exclusive supply were available to suppliers in the northern region, southwest Victoria, South Australia region, Gippsland and Tasmania, including King Island.
The owners of Saputo may have waited until they saw what its competitors were prepared to publish as opening offers.
Saputo's exclusive minimum milk price includes an additional $0.15/kgMS above the non-exclusive minimum milk price to be offered in each region.
Saputo has included other incentives for farmers, including a payment of $0.70/kgMS on any net growth in a farm's milk solids and a flat payment option.
New Zealand owned dairy cooperative Fonterra followed up its downgraded FY24 offer to NZ suppliers one week earlier, with a similar offer to Australian suppliers.
Fonterra Australia managing director, Rene Dedoncker, announced an offer of $8.65/kgMS, citing the impact of falling international dairy markets.
Mr Dedoncker said world values had contracted by 17 per cent over FY23 but he was confident in the company's ability to be competitive.
Mr Dedoncker said Fonterra would focus on manufacturing high value dairy products.
The Bega Group buys milk out of Victoria, NSW, Queensland, South Australia and Tasmania and its offers are based on seasonal production, but vary between regions.
Northern Victorian, Riverina and Southeast SA suppliers entering a non-exclusive contract are being offered a a range of prices across the year that compound with productivity; from $5.352-$5.702/kg butterfat and $10.704-$11.404/kg protein. There are premiums for contractors that sign exclusive supply agreements, and prices are subject to seasonal milking.
Bega is also offering growth incentive payments in FY24 of $0.18-$0.72/kg butterfat and $0.36-$1.44/kg protein; and exclusive supplier incentive payments of $0.55/kg butter and $1.10/kg protein (an estimated $0.80/kgMS).
NSW dairy farmers are being offered a lower price. In the Bega and Bodella regions, Bega's non-exclusive milk payment system (before incentives) ranges across the year from $5.23-$6.51/kg butterfat and $13.075-$16.275/kg protein.
In the Hunter Valley, west NSW and Sydney to southcoast regions, Bega's non-exclusive payment offer ranges from $8.10-$8.44/kg butterfat and $12.16-$12.67/kg protein.
Bega's non-exclusive agreement FY24 minimum price offering to its NSW mid north coast region suppliers ranges from $8.85-$9.21/kg butterfat and $13.28-$13.82/kg protein.
Some South Australian suppliers are being offered a minimum payment of $7.03-$8.29/kg butterfat and $10.55-$12.44/kg protein by Bega in its FY24 non-exclusive agreements. Those farms sitting in the southeast SA and Victoria region are not so fortunate. Their minimum offer from Bega is $5.352-$5.702/kg butterfat and $10.704-$11.404/kg protein.
Bega is offering a FY24 minimum price of $6.23-$9.10/kg butterfat and $9.34/$13.66/kg protein to Tasmanian dairy farmers supplying the company in a non-exclusive agreement. There is a premium for suppliers entering an exclusive supply agreement.
Bega's FY24 offer to existing and potential Queensland suppliers varies between $0.31-$0.33/litre for a non exclusive supply agreement, stepping up to $0.32/$0.34/l for exclusive supply. Productivity incentives include payments when monthly production exceeds 3,000kgMS.
Mid-sized companies aimed to be competitive
Burra Foods, was another processor to lower its FY24 offer, compared to FY23.
Burra Foods, in South Gippsland, announced an FY24 minimum farmgate price range from $8.50 to $9/kgMS.
CEO Stewart Carson cited global impacts affecting the company's price offer, and said a restructure within the organisation has helped Burra Foods to improve productivity while reducing costs.
Australian Consolidated Milk manages 500 million litres of milk and seeks suppliers in the MurrayDairy, WestVicDairy and GippsDairy regions.
ACM's exclusive milk supply agreement is a minimum price based upon a range in values of $5.50-$5.80kg butterfat and $12.09-$12.95 protein.
ACM is also offering a productivity payment up to $0.03/l based on volume, and a closing price guarantee of an additional $0.10/kgMS.
ACM's exclusive price offering for organic milk is substantially higher, up to $0.10/kgMS butter fat and the same for protein.
![Accredited organic milk received a premium offer from some milk processors. Accredited organic milk received a premium offer from some milk processors.](/images/transform/v1/crop/frm/silverstone-agfeed/2075063.jpg/r0_96_1024_683_w1200_h678_fmax.jpg)
Family-owned Kyvalley Dairy Group is sourcing its milk supply from southwest and northern Victoria.
Kyvalley Dairy Group has offered a base milk price of $0.59/l, with seasonal incentives of $0.018-$0.063/l or a flat supply bonus up to $0.08/l; and bonuses paid on cell counts, to its northern Victorian conventional suppliers.
Suppliers of A2 milk will receive a minimum of $0.62/l, with similar incentives and bonuses.
Western Victorian suppliers have been offered a payment of $8.97/kg butterfat and $8.97/kg protein for exclusive supply, or $8.50/kg butterfat and $8.50/kg protein for non-exclusive supply.
Kyvalley Dairy Group is paying a premium for the supply of certified organic milk - a base milk price of $9.50/kgMS for non-exclusive supply and $10.50/kgMS for those dairy farmers who sign contracts for exclusive supply.
Farmer owned South West Dairy, based at Cobden, offered a minimum price of $9/kgMS to its suppliers who sign an exclusive supply contract.
A minimum price of $8/kgMS was offered to suppliers who sign a non-exclusive supply contract.
Smaller processors competed for supply
ADFC - Australian Dairy Farmers Corporation - announced a minimum FY24 milk price of $6.32-$7.12/kgMS, with quality incentive payment of $0.28/kgMS for non-exclusive supply. Exclusive supply saw a minimum offer to suppliers of up to $9.45/kgMS.
Beston Global Food Company seeks supply from South Australian and Victoria's western district dairy farmers and announced a FY24 weighted average price of $8.90/kgMS and off peak supply, growth and productivity incentives.
In announcing the price, Chairman Dr Roger Sexton said Beston was continuing to incentivise growth in milk supply from its suppliers.
More than 30 per cent of SA's milk was processed at Beston's factories in FY2022.
Frestine Dairy Australia offered an opening minimum price of $8.80/kgMS to its suppliers, in a non-exclusive agreement. FDA is seeking an additional 70 million litres for the 2023-24 season.
Victoria's Goulburn Valley Creamery announced an opening FY24 milk price of $8.50-$9.10/kgMS for non-exclusive and exclusive supply.
Last year, GVC announced an FY23 opening price of $9.20/kgMS and increased it to an average of $9.75/kgMS by the end of June 2022.
South Australian company La Casa Del Formaggio is a family business and has issued a price offer based on volume supplied of $8.67-$10.55/kgMS (average $9.50/kgMS) or $0.624-$0.759/l (average $0.684/l). These prices include incentives.
In late May, Tasmania processor Mondelez International offered a weighted average opening price of $8.50-$8.73/kgMS to exclusive supply contract farmers.
Dairy farmers wanting to sign a non-exclusive supply contract with Mondelez International were offered a weighted average price of $7.70-$7.93/kgMS.
Mondelez pays a base price, plus a Cadbury Premium and volume incentives. Exclusive suppliers receive an additional supply premium.
NSW milk processor, Noumi, has offered a base milk price of $9.30/kgMS to its exclusive and non-exclusive suppliers.
Noumi produces shelf-stable dairy products for the food service industry and general public.
Do due diligence
The minimum price or schedule of prices offered by a processors enables a farmer to know the minimum amount they will be entitled to receive, based on supplied volume of milk, for the contracted period.
The ACCC recommends farmers keep in mind the following considerations, when comparing processor prices:
- Your farm has its own volume supply, supply curve, quality and components which will affect the actual milk price received.
- You must read the Milk Supply Agreement closely to understand other payments such as loyalty and sign on payments that aren't factored into the milk price announcement.
- You must also familiarise yourself with the processor's Statement of Circumstances (a statement setting out the circumstances in which the processor would enter into the standard form MSA). If seeking a higher milk price, ensure any benefits are not outweighed by the cost of producing that milk.
- Speak directly with any processor you are considering supplying and obtain an Income Estimate. This is the best way to understand the price that will apply to you. Do your due diligence, it is your business.
This is not an exhaustive list of dairy processors and their FY24 price offers, and was compiled by the best information available in the public domain at the time of writing.
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