International dairy prices have risen and the Aussie dollar has fallen. Analysts say conditions are ripe for farmgate price step ups. Here’s why.
International dairy prices are 17 per cent higher than eight months ago when processors were mandated to reveal their opening prices, industry analysts say.
Not only has the Global Dairy Trade headline figure risen by 17 per cent since June but the Australian dollar has also slid over the same time frame, blunting the competitive edge of American and New Zealand dairy imports.
Bendigo Bank senior insights manager James Maxwell said the GDT was trending around an 18-month high, with whole milk and skim milk categories on the index performing strongly.
He noted the GDT now hovered 17 per cent higher than when opening prices were set in June as part of the federal government’s mandatory dairy code of conduct.
“A round of step ups from major processors late last year resulted in the average southern farmgate price lift from $8.10 to $8.20 per kilo milk solids,” Mr Maxwell said.
“(That’s) still 14 per cent lower than last season.
“Across the ditch, Fonterra has responded to improved global prices by lifting their forecast payout to New Zealand producers 25 per cent — from opening at around $NZ8.00 to $NZ10 per milk solids.”
In December, Fonterra provided NZ farmers with a third price lift to hit double digits at the Kiwi farmgate for the first time — the same week it provided one of Australia’s first farmgate step ups for the 2024-25 season.
Bega and Saputo quickly followed ahead of Christmas while Australian Dairy Farmers Corporation is the only processor so far this calendar year to provide a price rise.
Bulla management has indicated a review in their farmgate price in mid February.
Maxum Foods general manager Edwin Lloyd said the trans-Tasman gap in farmgate prices was likely to close by winter.
“In the 2023-24 season, Australia’s farmgate was well ahead of New Zealand. Then that has turned around and now New Zealand is running strongly in front of Australia,” he said.
“We’d expect to see those two farmgate prices come into greater alignment when Australian processors have to set their opening prices as part of the mandatory code.
“There’s a tightening of supply around the world for a variety of reasons. The United States is one to watch — the bird flu outbreak, changes in the balance between beef and dairy, there’s been some contraction there in dairy production.”
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