Strong milk supply agreements predicted

On July 1, the new milk season will commence, where the new minimum prices offered by milk processers and brokers come into effect for the agreed term. Photo by Rodney Braithwaite

Australia’s dairy farmers will move into an intense month of assessing milk price offers and contract terms from processors as the annual milk supply agreement season opens.

Under the Australian Competition and Consumer Commission Dairy Code of Conduct implemented in January 2020, buyers of raw milk are obligated to complete and make publicly available milk supply agreements (MSAs) by June 1, that outline key terms and conditions for milk supply, including price.

On July 1, the new milk season will commence, where the new minimum prices offered by milk processors and brokers come into effect for the agreed term.

Australian Dairy Products Federation president Grant Crothers said it was the time for dairy farmers to review all matters regarding revenue for their raw milk and fully evaluate the key terms of their MSAs.

“The Milk Value Portal was established to provide greater transparency on raw milk pricing in each of the eight dairy production regions across Australia, and becomes particularly valuable in June, with pricing data as well as each MSA and its contract features for the new 2022-23 season being made easily accessible on the portal within the first 10 days of that month,” Mr Crothers said.

“MSAs outline the terms and conditions of milk supply, which are applied to drivers of milk value such as location, seasonality, milk volume, milk composition and quality.

“Farmers and farm advisers are strongly encouraged to use the MVP to help navigate their way through contract conditions, offered farm gate milk prices and the market factors driving them.

“The MVP is a well-established source of primary information that can help farmers understand how milk is being valued as they enter the busy June period.

“The interactive Farmgate Milk Value Tool allows users to get a regional comparison of average farm gate milk prices, influenced by different farm characteristics such as seasonality of milk supply, size of farm and milk components, for the year and for each quarter.”

Milk price data and MSAs for the 2022-23 season will be made available on the MVP, now offering four years’ worth of data on the farm gate milk prices being paid by dairy processors to farmers and new insights into where opening farm gate milk prices land relative to the Commodity Milk Value — an indicator of milk prices.

“Despite volatility in a number of key markets, several processors have already announced opening milk prices, providing dairy farmers with clear price indicators and greater certainty around the upcoming milk price season,” Mr Crothers said.

“Providing early price indicators, being able to discover key drivers of value and their influencers, and having full access to milk supply terms and conditions, helps farmers to see the future more clearly and enables them to run a better dairy farming enterprise in the year ahead.”

Mr Crothers said demand from the processing sector for raw milk continued to be high, which would likely be reflected with strong opening 2022-23 prices.

“Though we are (a few) weeks out from the commencement of the new milk season, we’re confident that 2022-23 will be remembered for its record high opening farm gate milk price in the southern milk region and a tight supply market, putting immense pressure on processors to get their product mix selection right.”

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