Recently we have seen some comparison of prices of butterfat paid to farmers versus the price of butter on supermarket shelves.

It’s a bit of a challenging comparison.

Comparing a farmgate butterfat value with the price paid at the supermarket ignores manufacturing conversion, collection costs, the market uses of butterfat in this industry and retailer margins.

Australian dairy processors pay farmers on a range of protein to butterfat ratios. Some are at 2:1, others 1:1 and some in between.

They do this to ensure they have the ingredients they need to produce their product mix.

Perhaps an easier way to think about it is this…

You’re a smoothie maker, who’s product is majority yoghurt, with a couple of nuts.

To secure your ingredient mix, you encourage production by paying more for the ingredient you need most, which in this example is yoghurt!

For Australian dairy farmers, the protein to butterfat ratio also means they have a choice in who they supply and which ratio they select based on their own farm production systems.

To learn more about milk pricing go to milkvalue.com.au