New figures compiled for a UDV report show how average dairy milk prices have remained static in real terms over the past 10 years.March 5, 2014 4:00am
New figures compiled for a UDV report show how average milk prices have remained static in real terms over the past 10 years.
Although the prices have picked up for this season, they came off a low base in the previous year, described by one northern Victorian UDV leader as unsustainable.
The latest Dairy Australia Situation and Outlook report found farm gate prices increased by about 25 per cent this season, although the increased cash flow was being soaked up by paying off debts and creditors.
West Goulburn UDV branch president David Glass described the worst two years in the past decade, 2006-2007 and 2012-2013, as being unsustainable.
The figures, compiled by consultants Farmanco, show an average milk solids price of about $5/kg during those 10 years.
‘‘Prices paid to farmers who supplied companies that sold product mainly in the domestic market in 2012-2013, were also lower,’’ Mr Glass said.
‘‘This provides further evidence that prices paid for milk for the domestic markets are strongly influenced by fortunes in the export market.’’
He said the 2012-13 season was probably the toughest year since the end of the prolonged drought that affected northern Victoria from 2002 to 2010.
Mr Glass said the prices in eight out of the past 10 years were unsustainable.
Farmers had tried to adapt by increasing herd sizes and trying to lower costs.
Mr Glass said milk prices this season looked far more promising, starting out with higher prices, and he hoped they would reach $7/kg milk solids by the end of the year.
Farmanco principal Ian Gibb said the dairy industry needed some years of higher prices if it was to remain competitive.
Input costs for dairy farmers were identified in the Dairy Australia update as an issue to watch, with the northern Australia drought holding feed costs high, the possibility of fertiliser costs rising due to the weakening Australian dollar and demand for live dairy exports putting a floor in cattle prices.
One of Australia’s largest markets, China, is relaxing its one child policy which may see a rising demand in infant formula, made by Victorian processors.
Dairy Australia is anticipating steady international demand with the global economic recovery expected to continue.
The recently signed free trade agreement with Korea is expected to make Australian production more competitive.
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