Dairyfarmers urged to be cautious over milk price offers

DAIRYFARMERS are being urged to prioritise core minimum prices over temporary seasonal bonuses when assessing their supply options for the upcoming season.

The warning comes as major dairy processors reshape their pricing strategies to navigate a highly competitive procurement market. The Victorian Farmers Federation United Dairyfarmers of Victoria (VFF UDV) issued the warning following recent pricing updates from major industry players.

With intense competition for milk supply across key regions, several major processors have adjusted their financial packages to attract and retain suppliers.

VFF UDV President Bernie Free highlighted that while extra incentives provided temporary financial relief, they can muddy the waters during critical decision-making periods.

“With processors including Saputo and Lactalis announcing extensions to seasonal support payments into the new season, farmers need to understand exactly how those arrangements should be assessed when comparing milk supply agreements,” Mr Free said.

The dairy sector continues to grapple with high input costs, making any immediate cash injection attractive to producers. However, the peak farm body noted that structural transparency in contracts was crucial for seasonal planning.

“Seasonal support payments are welcome, particularly at a time when dairy farmers are facing significant cost pressures, but farmers should be careful not to let those payments distract from the fundamental decision they are making about who they will supply milk to for the season ahead,” Mr Free stated.

A primary concern for the UDV is how these payments interact with the regulatory framework governing the industry. The landmark Dairy Industry Code of Conduct offers strict protections regarding minimum price structures, but discretionary or separate bonuses often fall into a regulatory grey zone.

“While seasonal support payments may provide additional income, they do not offer the same certainty or regulatory protections as a minimum milk price contained within a milk supply agreement,” Mr Free explained.

The lobby group advised producers to strip away discretionary bonuses when evaluating competing market offers to find the true baseline value. “The starting point for any comparison should be the milk supply agreement. Farmers need to understand the minimum milk price being offered, examine the income estimates closely and understand exactly what is driving those estimates,” Mr Free said.

The UDV has argued that if processors have the financial capacity to offer extended seasonal support, those funds should be fundamentally integrated into the standard opening price. Shifting these funds into the regulated minimum price would provide stronger legal backing for farmers.

“If processors believe current market conditions and ongoing cost pressures justify higher returns to farmers, there is a strong argument that those returns should be incorporated into the milk price rather than delivered through separate arrangements outside the code,” Mr Free urged.

As input volatility persists, the farm sector's priority remains securing legally binding, transparent pricing that safeguards family businesses throughout the financial year.

“What farmers need most is certainty. A fair milk price contained within the milk supply agreement provides that certainty far more effectively than payments that sit outside the protections of the code,” Mr Free said.

“At a time of ongoing cost pressures, dairy farmers need fair returns backed by the protections of the code, not separate arrangements that sit outside it.”