Global Milk Prices Are On The Rise

Sep 09, 2016

Recent data on global dairy prices shows a positive rise that looks as if it might continue.

The average price in the Global Dairy Trade auction overnight rose by 7.7 per cent. This followed two consecutive rises in the past month, with a 12.7 percent increase in prices at the most recent auction, while the important whole milk powder (WMP) price rose by 3.7 per cent.

These results have driven the index to an 18 month high.

Analysts are predicting further rises in the global milk price which suggests that the worst might be behind us and we may start to see some stability return to the global milk supply. This will hopefully occur through rebalancing of supply and demand due to cut backs in EU production, intervention buying of SMP (skim milk powder) in Europe and increased buying in China.

Although these increases are nowhere near enough to return to sustainable prices it is pleasing to see that prices are on the rise and things may be looking better in the long term.

Unfortunately, the most optimistic scenarios see the market turning in any meaningful way in the first quarter of 2017.

As dairy farmers we have a limited capacity to manage the market price so it is important to always focus on what we can manage, remain aware of industry risks and maintain a low cost production system so we are in a better position to weather any storms.

While we are an industry that has been under intense pressure, we are also an industry that has the know-how and resilience to overcome adversity and thrive in the long term.

ADF, together with our state members, is continuing to fight for farmers. Even though we won’t be able to solve all of the issues farmers are facing, we are working to relieve some of the pressures to create change to ensure that an unfair share of the risk in the value chain is not taken by the farmer and that recent events in the industry don’t happen again.

Collaboration is the key to get us where we need to be. Our industry relies on all the elements to operate effectively. Farmers need processors and vice versa – so the solutions require all of us to come together to ensure a positive future.

While we wait for the uptick in prices we must remember that we are a resilient industry with a long, sustainable future ahead and our profitability depends greatly on the continued support of the Australian public.

It is important to remind the community that dairy farmers – regardless of the challenges they face are good business people, who care for their cows, work to enhance the well-being of their people and that every efficiency we make on farm has ties to minimising our impact of the environment.

To view the global dairy price index [click here]

David Basham

Acting ADF President


 

 

What We Really Need Now

Aug 19, 2016

The Four Corners ‘Milked Dry’ program aired Monday 15th and highlighted the financial toll that cheap dairy products and fluctuations in both the domestic and global markets have taken on dairy farmers. This state of crisis has also shown just how far consumers will rally to help our struggling industry, but it will only solve half the problem.

What we really need now is to go beyond short term measures to create stability for our industry’s long term future. The need for transparency and improved fairness by finding new ways to manage price volatility for farmers; and through simplifying supply contracts so farmers know exactly what it means and how it will affect them.

The first in a series of formal talks with the dairy industry, the Prime Minister Malcom Turnball, Deputy Prime Minister Barnaby Joyce and representatives of Murray Goulburn met to discuss ways to increase the profitability of the Australian dairy industry in order to support farming families and their communities. An important thing to take away from this meeting is the fact that the Australian Government and Murray Goulburn both agreed that Australia’s dairy farmers deserve fair returns at the farm gate, as well as transparency in milk price arrangements and supply contracts. Another important outcome was the role Murray Goulburn will play in explaining to their suppliers what steps they will take to support farmers and restore confidence to the dairy sector.

We expect a similar message and outcome of next week’s meeting between Fonterra’s Australian management and the Government who will continue to discuss the state of the dairy industry and how the current issues could be avoided in the future.

The last in the series of talks is the dairy symposium to be held in Melbourne on August 25, chaired by Minister Joyce with representatives from the farming, processing and retail sectors. We will be asking the government to formally review a number of high priority issues including $1 milk, fair contract terms and conditions, and a world dairy commodity pricing index.

At ADF, we are working closely with state members and dairy farmer representatives to make sure the government continues to strengthen the industry through consultation with both Australia’s dairy farmers and processors. We are committed to provide innovative and practical solutions to help farmers achieve a sustainable level of profitability and ensure that our farmers’ best interests are reflected in the work we do so they can take control of their situation and make informed choices.

One of the ways the government is helping dairy farmers is by providing assistance through a $579 million support package. This package includes access to Dairy Recovery Concessional Loans, Farm Household Allowance (FHA), the Rural Financial Counselling Service and an additional $900,000 for Dairy Australia to roll out ‘Tactics for Tight Times’ one-to-one farm business advice.

The government support package is there to help us through this difficult time. It is very important that dairy farmers, including farm owners, share-farmers or leasers not self-assess their eligibility for government assistance. If you have any questions relating to whether you are eligible for the concessional loans, please contact a financial counsellor or the relevant state delivery agency as they will be able to help you with information and the application process.

David Basham

Acting ADF President  


 

 

June President's Message

Jun 30, 2016

Opening milk price announcements made this week by Murray Goulburn and Fonterra have once again, reinforced the need for improved transparency in the way milk pricing is structured and communicated in Australia.

Not only are the announcements much too late for farmers to properly budget and plan around, but many questions have to be asked to understand them. Add to the already complex system a loan repayment and the forecast opening price is far from what it first appears.

Both Murray Goulburn and Fonterra’s recent announcements are confusing and difficult to understand – they lack clarity and transparency.

Murray Goulburn’s repayment system is complex at best. Further, the exact amount that farmers will repay by the end of the financial year 2016-17 is not articulated in the announcement – nor is it clear that farmers will actually pay an initial repayment of 14 cents per kg/ms plus any further repayments Murray Goulburn decide to deduct.
 
Fonterra’s announced opening price of $4.75kg/ms was better than expected, however the detail around who received what is not clear. Existing Fonterra suppliers will receive around $4.75 ($4.73 due to interest on the loans). Any supplier who did not supply Fonterra milk in May-June (including farmers that had dried off) are not eligible for the Autumn offset and therefore receive around $4.54.  
 
We shouldn’t have to ask to get this information – it should be clear as day. After all farmers are providing the very lifeblood of these organisations, it’s in everyone’s best interests that we get this information up front and can work within these means. 

Improving the transparency of the milk pricing system is important, and Australian Dairy Farmers (ADF) continues to work with our state members to this end. It is essential that processors come to the table and discuss this as a collective, to help protect the future of our sector.

No one can dispute that the current market situation for dairy farmers, whether you are a supplier to the export or domestic market, is rough. Even the best placed businesses will be making difficult decisions.

While we cannot change the milk price, ADF is working hard with our state members to improve the transparency in the milk pricing system and simplify milk contracts. We are also fighting for farmers to better manage the risk throughout the supply chain so that they do not always bear the financial risk.

This weekend Australia takes to the polls and by next week the successful party will be moving into Parliament. ADF and our state members will be back in Canberra as soon as the elected party is announced to keep the pressure on.

As an industry dairy has supported its own and will continue to do so. We’ve never asked for a bail out but rather for targeted assistance that will help get our industry over the current hurdle and better balance risk throughout the supply chain going forward. We need structural change that improves fairness and brings more balance into the market – competition law can be improved more.

ADF acknowledges the Dairy Recovery Concessional Loans are now available in SA, TAS and Victoria. We welcome this support, and will continue to advocate that all affected dairy workers are eligible for this assistance. 

I encourage all farmers to keep talking to ADF, your state representatives and RDPs. It’s tough for everyone out there right now, and the season ahead will be challenging. This will go beyond the farm gate, with our service providers and communities likely to feel the pinch too – keep this in mind and let’s all look out for one another.

David Basham 

Acting ADF President

United we are always stronger

Jun 24, 2016

Australian Dairy Farmers’ (ADF) first priority in recent months has been to secure support for our industry led initiatives, and targeted assistance from Federal and State Government to help see farmers through the short term cash flow crisis. It is frustrating that this has created the expectation of immediate relief yet some farmers are not eligible. We continue to lobby strong on farmers’ behalf to secure access for all affected farmers to Dairy Recovery Loans, now available in Victoria and Tasmania. We expect criteria to be released imminently in South Australia and New South Wales.

Many farmers have been calling the ADF and state dairy farming offices to discuss these assistance mechanisms, and highlight accessibility issues. We encourage all concerned farmers to keep these communication channels flowing as it is vital for ADF to know which issues to target.

As an industry, we are going beyond these short term measures to create stability for our industry’s long term future. Central to this is finding new ways to manage price volatility for farmers.

ADF in collaboration with our state members has long advocated the need for competition policy reform that addresses the unequal balance of market power in the supply chain with not only a Mandatory Code of Conduct to control said power, but also a Supermarket Ombudsman to effectively regulate the code. We have made important in roads in the last two years, but there is still work to be done.

Ideas developed through the Markets, Trade and Value Chain meeting last week are being progressed and work with the Australian Competition and Consumer Commission is gaining traction.

All three major political parties have come to the table to discuss potential solutions over recent weeks, and this is to be commended. It is essential that this movement does not stop at political rhetoric, but rather translate to real and tangible changes for our industry.

Ensuring issues that affect our entire sector’s ongoing productivity and competitiveness are on the Federal political agenda remains equally important during these tough times.

In particular, ADF continues to seek commitments from all political parties to support dairy’s access to secure, affordable water resources. While recent rainfall has been a welcome reprieve for many regions the long term outlook for water allocations remains bleak. ADF continues to push for vital changes to the Murray Darling Basin Plan and environmental water trading to make certain enough water is available when farmers need it and at an affordable price.

Funding for dedicated agricultural health services and resources is urgently required to safeguard the wellbeing of our workforce. Federal Government should make ongoing commitments to vital resources including the National Centre for Farmer Health to match that of State Government.

We continue to work closely with the National Farmers Federation to accelerate agriculture by addressing key workforce issues including the scrapping of the backpacker tax, as well as supporting industry’s efforts to reduce carbon emissions intensity.

Ensuring these priority areas are addressed in the upcoming election will enable our industry to take control of its own destiny, and develop a stronger, more prosperous and sustainable future.

Australian dairy farmers know we’re not immune to significant market forces such as the slowdown in the Chinese economy, or the Russian ban on importing product. But the low prices announced recently will be below the cost of production for many farmers. While some have faced such volatility before their current situation is no doubt compounded by the unprecedented challenges driven by processor decisions in the 2015-16 financial year.

ADF continues to work with all our state members - QDO, NSWFarmers, SADA, TFGA, UDV and WAFarmers as well as industry partners to hold State and Federal Government to their promises of support, and to drive real, meaningful change throughout the supply chain for the betterment of our industry. Together we are stronger than we will ever be divided – and united we will support farmers through the challenges they currently face.

David Basham

Acting ADF President

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