Opening milk prices were likely to be down on the same time last year when the season starts in about six weeks time, according to a leading industry analyst.
Bridgecape Commodities managing director Scott Briggs was addressing the inaugural Dairy Farmers Victoria (DFV) forum, Melbourne.
Last year, Fonterra Australia announced an opening weighted average milk price for the 2023-24 season of $8.65/kg MS, compared to 2022.
"I think we will see a price that probably declines, on last year, but June has a long way to play out and the base for me is that global milk price of $7.75c/kilogram Milk Solids (kg/MS)," he said.
"I can see anything from an opening price from $7.75c/kg MS to maybe even $8.25c/kg MS - it's going to depend very much on how much competition there is for milk, and how that plays out in June."
Final prices, this season, averaged between $9.35-9.40c/kg MS.
About 85 per cent of Australian dairy products, whether that be liquid fresh milk, butter or skim milk power was linked to an "import parity price," he said.
Such products were effectively competing against imports, he said.
"The June contracting, last year, got quite out of control - understandably there was a lot of competition for milk, at the time," he said.
He said there was always going to be a desire from processors to grow their milk pool
"I think the processors have said they are keen to grow in some areas and maybe shrink in others, to optimise their milk pool," he said.
"I think there is always competition, at a price.
"I think up around the mid 800c/kg MS, or a bit higher, you may get to a point where processors feel like they want to hold onto their milk, but maybe they don't want to grow their supply.
"The nature of June really saw prices really ratchet up and get well above what global prices were, at the time.
It had been a difficult couple of years for processors, which had highlighted issues with the once-a-year release of prices, Mr Briggs said.
"The market can move down, or move up, and at some stage that leaves winners or losers, whether that's processors or farmers," he said.
"In terms of competition, we have seen a little bit more milk this year, just naturally - and probably, really importantly, there has been a fall in demand on the retail shelf.
"It hasn't been as strong, as it has in past years."
Part of the fall in global prices had been the situation in China, he said.
Imports into China fallen 20pc over the last 12-18 months.
"While we have had 20pc food inflation, here and in the US, in China it's running at sub 5pc, because the farmgate is subsidising the consumer," he said.
"Whilst poor margins on farm would result in milk production dropping - quite precipitously - farmers haven't been allowed to cut production.
"There are contracts for a certain amount of production and there are some subsidies going in there, but they are also being forced to sell spot milk."
A lot of farms were also owned by manufacturers, "two or three manufacturers own 60-70pc of the cows," he said.
The action of the Chinese authorities had driven a decline in commodity prices, he said.
"That comes back to the Australian farmgate, either via getting less value for our exports or having to compete with cheaper imports," he said.
Andrew Miller
I'm a general reporter with Stock & Land, with a special interest in irrigation issues. I completed my cadetship, with the Age, in 1980. Over my career, I've worked for ABC radio news (Mt Isa, Qld) and at provincial and suburban newspapers.
I'm a general reporter with Stock & Land, with a special interest in irrigation issues. I completed my cadetship, with the Age, in 1980. Over my career, I've worked for ABC radio news (Mt Isa, Qld) and at provincial and suburban newspapers.
