Dairy farmers agree global headwinds are set to affect milk prices

Bridgecape Commodities managing director Scott Briggs told the inaugural Dairy Farmers Victoria (DFV) forum, Melbourne, he believed prices could open between $7.75-$8.25 cents a kilogram Milk Solids.

He stressed that was in the current climate, and things could change between now and June 1

Dairy Farmers of Victoria president Mark Billing said Mr Briggs had made a very good case and most forum participants would have felt his presentation was not "outlandish".

"It is a line in the sand at a certain point in time, as he pointed out," he said.

"But is a cautionary tale that there are some headwinds for the milk price and we will need to advocate, as dairy farmers, for the best price we can get because we need to remain profitable to remain in the industry.

"I think what he pointed out is that there are a number of market forces going on and we play in a market that is both domestic and international."

A lower number of $7.75c/kg MS would "put shivers into any farming business".

"But, as Scott said, it's a point in time," he said.

"There is an uptick in international markets.

"We saw a very, very small increase in the Global Dairy Trade, it's up 0.1 per cent, but we have a little way to go until June 1 when we see what the processors are thinking."

Some processors, including Bulla at Colac, were expanding, he said.

"There is still investment, which is a great sign for the industry - while Lactalis are closing down in Echuca, they are investing in Bendigo and modernising facilities," Mr Billing said.

"There is no doubt there are farms that would struggle with a lower milk price, as there are processors who will struggle if the milk prices stays were it is, or even goes higher.

"All parts of the supply chain need to be profitable."

Larpent dairy farmer, Lachie Sutherland said the price range suggested by Mr Briggs "would definitely create an impact in the industry".

"People will obviously hoping for a bit more, but they need to be realistic about where the market is, I guess," he said.

"The whole industry has to be sustainable."

He said "the real story" will come out by the end of June and there was "definitely demand" for milk.

If that was the price eventually offered by processors, it would make it tough for farmers who had invested in infrastructure.

"We would all have to fall back a little and they will probably get a bit less milk," he said.

The industry wanted to avoid a "yo-yo" of prices, and the prediction highlighted the inability of the system to flatten income and take out spikes.

Mr Sutherland said many farmers would be hoping for a figure "in the nines", for an opening price.

"It's still a little while out, yet," he said.

Bruce Knowles, Tyrendarra, said it was a realistic analysis but farmers were not in a position to take "too much of a fall" in price.

"I think it's a bit conservative at the moment, I think the processors have some very serious thinking to do, in regards to their approach to the new season," he said.

"Farmers will be watching very carefully how they approach it."

He said he was a great supporter of the mandatory Dairy Code of Conduct, which he thought was working very well.

The lower figure would make matters very tight.

"The big thing is the cost of production, inflation has had an impact on the whole industry - it's not only farmers, but it's also the whole processing sector," he said.

Despite strong milk prices, inflation had left them in a position which was "no better off," he said.