Australia’s dairy farmers hit with milk price cut
Dairy farmers in Australia have been hit with a farmgate milk price cut from major processors as they grapple with growing competition from imports. Fonterra Australia, Saputo and Bega have all cut farmgate milk prices by 15%.
This comes at a time, as recently reported in Dairy Global, when milk production in Australia has dropped to its lowest level in 30 years. Many farmers have stopped operating and young people are showing little interest in the sector due to many recent challenges. These include a long and very serious drought about 10 years ago, a retroactive slash of farmgate milk prices in 2016, difficulties in finding farm workers, rising costs of farmland, and the ongoing threat of future drought and floods in some areas.
Because of the lower milk supply, import competition and more, 10 Australian dairy processing facilities have closed over the past 18 months.
Extra pressure
Ben Bennet, president of Australian Dairy Farmers, noted that this new farmgate price cut will add to the pressure already on his fellow producers who are trying to survive. “Our costs have gone up considerably,” he said to ABC news. “At these values, processors could find themselves with an even smaller milk pool, as farmers quit the industry.”
Imports and exports
Fonterra Australia managing director Rene Dedonker recently noted to ABC News that while domestic milk sales are going well for his firm, their cheese and butter sales are suffering due to large volumes of cheaper imports. Dairy Australia statistics show imports of dairy products have nearly tripled over the past 2 decades and continue to rise. In addition, Fonterra Australia’s export sales are facing serious challenges.
Matt Watt, director at Farm Source (a division of Fonterra) noted to Australian farm media that the Chinese domestic market has changed recently, in turn changing the Australian dairy export landscape. “Production in China grew by 8 billion litres, and…the industry will continue to grow because of government investment,” he said. “This reduces their need to import.”
Australian exports have recently dropped by 17% whilst imports have risen 19%.
Fonterra restructures
Just after Fonterra leaders made these comments a few weeks ago, the company has announced its impending exit from Australia.
Fonterra plans a global sale of its well-known dairy product brands (Anlene, Anchor and Fernleaf) to concentrate on its ingredients business. As part of this restructuring, it has sold its ingredients business in Australia (and will therefore have no investments at all in that country) and has sold its consumer and foodservice businesses in Sri Lanka as well.
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