Milk supply agreement season has started!

Milk supply agreement season has started!

As per the Australian Competition and Consumer Commission (ACCC) Dairy Code of Conduct, which came into effect in January 2020, buyers of raw milk are obligated to complete and make publicly available milk supply agreements (MSAs) by 2pm on 1 June.

The Milk Value Portal (MVP) – an initiative of the Australian Dairy Products Federation (ADPF) – was established to provide greater transparency and understanding on the value of raw milk across the eight dairy production regions in Australia and becomes particularly valuable in June.

Milk price data and MSAs for the 2022-23 season will be made available on the Milk Value Portal within 10 days of this month, offering four years’ worth of data (current and historical) on the farmgate milk prices being paid by dairy processors to farmers.

We spoke with Steve Spencer, Director of Freshagenda – specialist food industry analysts supporting the Milk Value Portal – who shared his insights on current market conditions, pressures driving strong demand for raw milk, and what we’re seeing with opening prices 2022-23 season:

• The opening 2022-23 milk prices for major dairy manufacturers in Southern manufacturing regions offers a weighted average of approximately $8.40/kgMS, which equates to an increase of about $1/kgMS on the expected full season 2021-22, or a 12% increase.
• The tightness in global commodity supplies has driven the market higher, due to weaker milk output in the three major producers – Europe, the US and New Zealand – meaning milk is more valuable around the world than it was 12 months ago. This is made even more acute due to good demand in both Europe and the US for cheese, which has left a much lower availability of milk powder and butterfat.
• Commodity prices have surged since the third quarter of last year but have been kept firm since late February due to a combination of the effects of the war in Ukraine and the weather, which has shorted the world of grain, vegetable oils and fertiliser supplies and kept prices elevated.
• Recent lockdowns in China have weakened demand and caused Oceania prices to ease from their peaks in April, but supply-side pressures have not abated, and it may be sometime late this year or early next year before we see any lift in milk output.
• Meanwhile, the Australian milk pool has continued to shrink with the pressure of farm exits, labour challenges and higher input costs, and this will ensure vigorous competition for raw milk, which is likely to drive these opening prices a little higher yet.

These insights and more are available on the Milk Value Portal, with the next Quarterly Insights Report due in early July.

A new Podcast on the Milk Value Portal is also available, where Sheena Carter, NSW Department of Primary Industries (DPI) interviewed Janine Waller, Executive Director ADPF talking about the new seasons milk pricing and the benefits of the Milk Value Portal. Listen here.

To learn more or to register to receive updates from the Milk Value Portal, visit www.milkvalue.com.au.

ENDS