News

Farmer wants overhaul of milk pricing system

By Sophie Baldwin

Strathmerton dairy farmer Greg Brooks believes the current milk pricing system is outdated and favours processors.

He would like to see a complete overhaul of the entire process and believes there is nothing in the dairy code processors can’t get around.

He believes the dairy code does little to hold processors accountable, pointing out Fonterra opening at $6.06 and increasing its price to $6.40 in less than 24 hours was a perfect example.

“What if all processors had opened around $6, where is our platform to argue for an increase for the true cost of production and what is their actual mechanism for calculating an opening price?,” Mr Brooks said.

“Is it based on world prices and what if the world price is just a result of farmers’ acceptance — what would happen if the farmer said no?”

He said if a processor had unforeseen circumstances it could drop its price, but a farmer can't demand more money if they have an unforeseen circumstance.

Mr Brooks acknowledged it was hard to reset the thinking of an industry when many are down the path of acceptance for the current process.

“It is the way it has been for many years and change is never easy.”

He would like to see farmers unite and offer their milk to processors for a tender price, whether that be on a monthly basis or longer.

“If I value my milk at $7.50/kg MS to cover the cost of production and make a living, well that should be the value of milk for that particular period.

“If the majority of farmers stood by this process, we would get paid a true value for our product and have a thriving industry, not the contracting one we currently have.

“At the end of the day I am the one producing the milk, so I need to have some negotiating power; currently we have none and by and large are still price-takers.”

Mr Brooks said if a processor offered a two-tiered system it would give farmers a market signal, to increase or decrease production.

“If 60 per cent of milk was $7 and the second level was $6 then you get the extra milk when season permits or do we drop production to the level to suit and squeeze out the cheaper products?”

Mr Brooks and his wife Jodi milk 250 cows on 160 ha. They bought their farm 13 years ago.

They own 70 to 80 per cent of their water requirements through high-reliability water shares and bore water.

“Since we bought our farm I would be comfortable in saying nine farmers have exited the industry around us and only three remain — none of us left are milking more cows, instead I would say we are going the other way and milking the same or less,” Mr Brooks said.

Knowing the true cost of production and continually crunching the numbers is an everyday part of the business.

“Every farmer should know the cost of producing milk on their own farm and there are some really great resources out there to help with this process, like Murray Dairy’s funded Taking Stock Program.”

Mr Brooks is president of the local UDV branch.

“I think the whole industry needs a complete reset including the UDV.

“We have no true advocacy and too many people are busy worrying about fairy dust than concentrating on the true issue — the real on-farm cost of producing milk and how we sell it.”