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Dairy projections buoy producers

17 Jun, 2013 04:00 AM
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VICTORIAN dairy farmers received a timely boost recently, with Dairy processor Murray Goulburn announcing a record opening milk farmgate price of $5.60 a kilogram of milk solids for next season.

MG's forecast price was 24 per cent more than last season and managing director Gary Helou said it would deliver an increase in cash of approximately $200 million to its suppliers.

"The opening price reflects the positive impacts of the $100 million operational savings, higher world dairy ingredients prices and a softening of the $AUD," he said.

"This early injection of cash at the beginning of the new season will be a major boost to our supplier shareholders who are enduring tough seasonal conditions and higher input costs."

The processor forecast a full-year price of between $5.80 and $6kg/MS (45c a litre).

Dairy Australia industry analyst John Droppert said a recent depreciation in the $AUD combined with relatively high commodity prices allowed processors to increase their projected prices.

"Our original projections last month ($5kg/MS) were based on the dollar being at 1.03/1.05/$USD. Since then it has dropped to 95c/$USD," he said. He added estimates showed a drop of 5c for the $AUD could increase the farmgate price by $0.30kg/MS.

"The exchange rate has added a huge upside that you would expect to flow through the farmgate milk price," he said.

"Commodity prices, despite backing off a bit in the past few weeks, have been at a higher level than last year."

Mr Droppert said with the US and EU unlikely to have a surge in milk produce this year, commodity prices were expected to remain constant throughout 2013, allowing processors to pass profits onto producers.

United Dairyfarmers of Victoria (UDV) president Kerry Callow said MG's opening price was "strong" and encouraged other processors to follow suit.

"We would welcome other factories to pay what they can afford to pay, if that's $5.80kg/MS then bring it on," she said.

She said the pricing system was transparent enough for producers to understand incentive-based loyalty payments.

"The intent from MG is to support producers by bringing forward cash flow which is a positive move," she said.

Ms Callow said the MG's forecast full-year price of $5.80-$6kg/MS was bringing milk production back towards profitable margins.

"I'd like to think it's closer to $6kg/MS, which is starting to get back into a profitable range but you still have to account for the cost of production," she said.

She said exchange rates, supply and demand issues and consistent supermarket pressure on the domestic milk market would contribute to influencing a full-year price but early signs were encouraging.

"Certainly the announcement is what's going to bring confidence back into the industry and we desperately need confidence to move forward," she said.

Murray Goulburn's announcement follows United Dairy Power's (UDP) forecast opening farmgate milk price of $5.80/kg.

General manager Darryl Cardona said UDP hoped to close in towards $6kg/MS, which should be a target placed on all industry participants.

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READER COMMENTS

Alex
17/06/2013 8:07:27 AM, on Stock & Land

Really?, why do we have 3 processors coming out with identical prices & forecasts?, do they all sell to one buyer at one price, do they all have identical running costs? Loyalty payments discourage free trade and reduce the need for companies to compete. Where is the ACCC? The export price with the dollar has had a 40% turnaround yet farmers will only 25%. No wonder factories are spending and why is DA interfering with the milk price? What is being done for when the EU abandons quotas? William these are the questions that need to be asked.

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COMMENTS

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Emily, have U seen what is happening to Chinas peasant farmers in their country? Cleared out and
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Hey it is pretty dumb all unifying together to make good progress if you are headed in the wrong
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jillaroo, how right you are. In fact Australian farmers still supply the lowest priced food