Milk price index ‘half-baked’ says Dairy Connect

The new national Milk Price Index is ‘half-baked’, because it provides only a snapshot of dairy farm production data and not analysis of the farm-gate impact of the costs of processing.

This was the view today of Dairy Connect CEO Shaughn Morgan. The index is designed to allow farmers to monitor milk price trends so to better understand market developing signals.

He said that, while the industry welcomed the initiative launched on July 6, the market analysis value of the Milk Price Index was diminished by what it did not deliver.

“Producers need transparency around processor manufacturing costs and their impact at the farm gate,” he said.

“Right now, we simply don’t have that information.”

As the ACCC stated in its final report:

“Processors should publish information identifying how their pricing offers apply to a standardised set of model farms, accounting for common differences in farm size, seasonality of production, whether production is growing or retracting and how penalties, such as those relating to quality requirements, impact on pricing offers.” (at page xxvi)

Launching the Milk Price Index, federal agriculture minister David Littleproud said farmers could access an index of commodity prices paid for cheese, butter, skim milk powder and whole milk powder exports.

“There will also be a one-year forecast of prices that will be updated quarterly, along with regular global, national and regional commentary,” David Littleproud said.

A Regional, Retrospective Farmgate Milk Price Index would accompany the index, with farmers urged to provide price data via an online form.

The Milk Price Index was one of a range of recommendations proposed following a major industry review tabled by the Australian Competition and Consumer Commission tabled in April 2018.

Graham Forbes, President, Dairy Connect Farmers Group said “producers needed access to whole-of-supply-chain analysis in order to build reliable future business strategies.”

“Here we are months out since the ACCC published its final recommendations and we’re still waiting on the Federal Government to commit to implementing a mandatory code of conduct to regulate producer and processor relationships which will deliver fairness and transparency,” Graham said.

“Now we have a milk price index of sorts, but our members are seriously questioning the impact of outcomes that had been set in train previously.”