How costs are chasing the record milk price

DAIRY farmers have welcomed the record opening price for milk in the past week, above $8 per kg milk solids, and pushing up towards $9.

But they’ve cautioned that costs are rising just as quickly, if not outpacing the monthly milk cheque.

“Look, I think the biggest issue at the moment is the input costs. Of course, you’re pleased to see a good opening price, but feed, fuel and fertilizer, together with the rising cost of land, energy, stock replacement costs and labour costs; just about anything you like to name is going up.”

That’s the view of United Dairyfarmers of Victoria Policy Councillor for Region 6, Ben Vag of Leongatha.

And he’s also concerned about a vacuum in information from the processors as to whether they’ve locked away domestic sales during the pandemic and don’t have the supplies to access the improving returns on the export market.

“It’s hard to gauge how they’re going at the moment, and we’d like to hear more about that from them but as for asking if they can pay more, that’s a matter for them. It’s also important to see our manufacturers in a strong position as well.”

But he said it was equally important that they continued to send the right signals to the market in order to secure milk supply.

“We’ve still got older farmers exiting the industry, and either selling up or going to beef, and we need to be seeing a return on investment or fewer and fewer people are going to continue milking cows.

“The rising cost of land puts pressure on leasing and share farming as an option and we’ve seen some young farmers biting the bullet and buying land which is a tough thing to do in the present climate.”

Fortunately, according to Andrew Mackie of Dairy Livestock Services, which organisers some of the dairy dispersal sales locally, there’s only a modest number of people going out of dairying at the moment.

“We had one a couple of weeks ago where the family was going over to beef, partly because they couldn’t get the labour, but there haven’t been that many.

“The issue for most is that while the value of land has gone up, which is good, you don’t see the benefit of that unless you sell. You might own a $15 million farm but you’re still working seven days-a-week.”

Leongatha based milk processor, Saputo Dairy Australia (SDA), announced its opening price for the 2022-23 season last week at a “weighted average farm gate milk price for non-exclusive supply of $8.50 per kilogram milk solids”.

It was a significant increase over the $6.55kg opening last year.

But there have been reports of Australian Consolidated Milk pushing up towards $9.

Burra Foods announced an opening milk price range of $8.20-$8.60/kg MS for the 2022-23 season in May. Fonterra has reportedly opened at $8.25. Step-ups are expected.