Milk prices now in a 'super cycle', says ADPF head

The ADPF has updated information on its Milk Value Portal, to provide farmers with new insights on the relationship between farmgate payments and CMV.

The ADPF said CMV was an important indicator to estimate milk price and is calculated on a weighted basket of commodities converted to an Australian dollar-denominated value.

In June 2020, CMV was mid-way through a sharp decline, led by an appreciating Australian dollar, driving opening prices to be slightly less than the 52-week average.

"Twelve months later, the world is a very different place with elevated and more stable commodity prices, and this is reflected in Southern Region opening prices that are more than $1/kilogram Milk Solids, or 20 per cent, above CMV," the ADPF said.

Milk price data for the 2021/22 season is now available on the Milk Value Portal, in the first major data update since the portal was first launched in November 2020.

ADPF president Grant Crothers said processors didn't pretend the farmgate price, across eight milk production regions, was easy to understand.

"Another year of high milk prices being offered by processors to dairy farmers is good news for agriculture and great news for dairy," Mr Crothers said.

"It appears we are in a super cycle - a third year of what is likely to deliver record prices for raw milk."

He said demand from the processing sector for raw milk continued to be strong, enhancing prices and providing advantages to dairy farmers.

In addition, the recent softening of the Australian dollar was good news for farmgate prices, supporting processors decision to 'go hard' at opening.

Meanwhile, dairy analysts say the rising trend of opening milk prices reflected growing competition to secure supply, amidst a flat overall pool.

Dairy Australia senior analyst John Droppert said the previous Situation and Outlook in March discussed an emerging pattern of aggressive opening milk prices aimed at securing milk, followed by less movement subsequently.

That was in contrast to the previously larger weighting given to intra-season step-ups,

Milk2Market's Richard Lange said the traditional way of announcing an opening price suppliers well, if they were in a processor's individual milk pool.

But when farmers were moving to a different processor, a platform like Milk2Market's Milk Exchange was valuable.

It's a national digital milk market, is not unlike electronic livestock marketplace, AuctionsPlus, or similar online grain trading facilities.

"It enables everyone to see what the price is at a point in time," Mr Lange said.

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He said it appeared a lot of the 'toing-and-froing' over milk prices, in recent weeks, was processors trying to hold onto their existing farmers.

"It's not so much a shrinking milk pool, but it's a supply-driven market at the moment," he said.

The new season date didn't mean milk had to be contracted by that time

"What the Australian Competition and Consumer Commission has set up is allowing sufficient transparency and publishing of the agreements, by putting in place a June 1 price deadline, " he said.

He raised concerns about the current high prices.

"There should be a note of caution on that, whether the step-ups are being put into these opening prices now, or are the processors bringing forwarded anticipated sales?" Mr Lange said.

"Are the companies taking on some expectations of what the markets will be?"

Fresh Agenda director Steve Spencer said competition was driving the regular step-ups, which had occurred in recent weeks.

Read more: Bega now has biggest influence on milk prices, says analyst

"I think the market is improving and our dollar has got a little weaker, so there is a little bit more money in the market," Mr Spencer said.

He predicted the milk-price merry-go-round of spiraling prices would end.

"It's not a 'sky's-the-limit" sort of thing," Mr Spencer said.

The ACCC's Dairy Code of Conduct nor COVID-19 were affecting the price rises.

"Exports have not been affected, the things that have been affected are logistics holdups, but people still have to eat and it's still a healthy market," Mr Spencer said.