The head of a dairy industry lobby group has expressed concerns about a proposed milk price index, ahead of Thursday’s Melbourne symposium.
Federal Primary Industries Minister Barnaby Joyce said he had convened the industry symposium, as he understood price transparency was of great concern to dairy farmers.
“We have committed to examine mechanisms, including a milk price index, which would provide clearer price signals to farmers,” Mr Joyce said.
He said industry bodies, including Dairy Australia and Australian Dairy Farmers were examining ways in which an index could be developed.
Australian Dairy Farmers acting president David Basham said he expected the index to be one of the key issues, discussed at the symposium – but expressed some concerns about how it would be set up.
“The intent is to some sort of benchmark to assess the price being offered by the companies, in relation to the world and domestic market within their region,” Mr Basham said
“This would allow farmers to see whether the price they are being offered by their company is in the realms of what should be offered.”
But he cautioned an Australian index would be more difficult to establish, than the one set up in New Zealand.
“New Zealand has such an index and it works quite well, as they have 90 per cent plus exports, and can set themselves against the world market.
“We have a 65pc domestic market, so it is much harder to put an index against.”
Mr Basham said it would take a while to bed down an index, but the symposium should give some direction as to how to go about it.
“It’s about getting that transparency for farmers - it was labelled as an index, but there would need to be some flexibility in the way it would work with industry, to get the transparency desired by farmers.”
Another key area for discussion was fairness and terms of contracts.
“We need to shift some of that risk to the rest of the supply chain – at the moment, farmers bear an unfair burden of that risk.”
Murray Goulburn (MG) chairman Philip Tracy expressed support for a commodity milk price index.
“MG’s pricing mechanism has worked effectively for many decades and through many industry cycles, but we do believe there is scope to improve the transparency of pricing for Australian dairy farmers,” Mr Tracy said, in a letter to suppliers.
“We support the call for industry wide consultation to ensure that the index is a true indicator of commodity prices and meets the requirements of the Australian dairy industry as a whole.”
