Australian dairy farmers brace for lower milk prices amid market uncertainty

AUSTRALIA – Australia’s dairy farmers are preparing for a reduction in farmgate milk prices by US$1/kg or slightly more as they head into a new season.

Fonterra Australia’s 1650 suppliers are also facing additional uncertainty due to the company’s potential divestment and the possibility of a new multinational owner within the next 12 to 18 months.

According to RaboResearch dairy analyst, Michael Harvey, f Australian milk prices for the new season is expected to be around US$8 to US$8.20/kg milk solids, reflecting lukewarm market conditions both domestically and internationally.

Farmers in regions like western Victoria, Gippsland, and northern Tasmania, where collection areas overlap, frequently switch processors from season to season.

The softer milk price outlook is partly due to an increase in Australian milk production, which is expected to reach 8.35 billion liters for the 2023-24 financial year, marking the highest output in 30 years.

Eliza Redfern, an analyst from Dairy Australia, attributed this production boost to timely rainfall and a return to average weather conditions in many regions.

However, the increase in production was not uniform, with drier-than-average conditions in southwest Victoria and Tasmania counterbalanced by wetter conditions elsewhere.

The absence of floods in dairying districts has also contributed to higher production, especially during the colder months.

For the 2024-25 season, Dairy Australia anticipates production to be about 8.3 billion liters. Fonterra Australia collects approximately 14 billion liters annually from 1650 farms.

Australia-based managing director Rene Dedoncker emphasized that all milk supply contracts would be included in any potential sale of the Australian operations, ensuring continuity and compliance with existing agreements.

Despite Fonterra’s commitment to maintaining normal operations, the divestment proposal has caused unease among dairy farmers.

Ben Bennett, president of Australia Dairy Farmers and a farmer in southwestern Victoria, expressed concerns about the timing of Fonterra’s divestment right before new milk price announcements.

He suggested that this development could serve as a wake-up call regarding the state of the dairy industry.

Bennett highlighted the need for an ethical and preferably Australian buyer for Fonterra’s assets. The Business Council of Co-operatives and Mutuals (BCCM) echoed these sentiments, pointing to Fonterra’s desire to grow value for its New Zealand shareholders as part of a broader trend of dairy industry consolidation.

The BCCM emphasized the importance of maintaining domestic sovereignty over food supplies, noting that Norco remains the only dairy cooperative left in Australia.

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