Fonterra New Zealand milk price drop has farmers cautious

Fonterra NZ announced recently it was reducing its 2023-24 farmgate milk price by a mid point average of $1 a kilogram milk solids, revising the range from $7.25-$8.75/kg MS to $6.25-$7.75/kg MS.

United Dairy Farmers of Victoria president Mark Billing was cautious about the announcement, but confident that Australian, and specifically Victorian producers, would not be as exposed to these fluctuating prices, considering the Australian market's lack of involvement in international exports.

"Domestic price and competition for milk has kept our price up and potentially this next coming season, we'll be sheltered," he said.

Darnum dairy farmer and Fonterra Australia supplier Dean Ford said he was feeling safe within the Australian market.

Mr Ford said the NZ industry was highly influenced by international pricing, making the Australian market comparatively more consistent.

He was however concerned that NZ's exposure to lower prices had potential to push cheaper products into Australia's domestic market, like cheese and butter.

"While we're not going to feel that now, it will then put pressure on next year's price," he said.

"Technically our price we're getting now is historically high and our price is above international parity and that's because of domestic supply and obviously domestic competition."

He said he had seen social media comments from a dairy farmer urging other producers to lock in long-term contracts with their manufacturers while prices were high, but he believed this wouldn't be necessary due to the security in prices on home soil.

Rather than focusing on NZ's low milk prices, he was most concerned about a lack of investment on Australian soil into upgrading manufacturing facilities; instead many were closing.

Westbury dairy farmer Chris Griffin believed this was because there wasn't enough production in Australia, or Victoria, for expansion to continue, with a decline in consumption.

"A lot of the plants probably aren't running to their maximum efficiencies because they haven't got the throughput," Mr Griffin said.

"All we can do is try and produce what we do, and in my case, we try and produce it as efficiently as we can and hope that the company does the best with it as far as the on sale of the products that they produce, to try and maximise their profitability, which then comes back to us."