ALL eyes are on estranged negotiations between Queensland dairy farmers and big processor Parmalat, with the outcome touted to set the scene for this year’s opening milk farmgate prices.
Parmalat’s northern suppliers are now operating outside of contract, in most cases at a 3 cents per litre price discount, because negotiations with the processor that began last April have stalled.
With all suppliers’ contracts, which range from one-year to five-year deals, expired as of the start of January, negotiations have entered the arbitration phase - for the first time since deregulation of the dairy industry at the start of last decade.
Against a backdrop of rallying global prices and declining production in Australia, milk producers around the country are furious the northern processor is pushing for downward movement on farmgate prices.
Queensland producers said Parmalat had offered a pay drop in excess of 1.5c/l, which would not be sustainable.
Parmalat has declined to comment, however farmers said the company was arguing it was no longer competitive with its opposition’s prices.
Chairman of collective bargaining group Premium Milk, Gympie’s John Cochrane said farmers were hurting but determined to stay the course.
“There is a reduction in volumes being produced throughout Australia and a bigger percentage drop to come in autumn,” he said.
“Milk from Victoria is not as available as some people think.
“More importantly, customers in Queensland would prefer to buy a quality, local product rather than milk carted 1200 kilometres.”
Mr Cochran said what really bothered farmers was that the ‘buy branded, buy local’ campaign mid last year made it very obvious the consumer was prepared to pay extra for quality local products but supermarkets and processors were not driving that home.
Capitalising on that consumer trend would bring the extra margin back to farmers and allow the northern dairy industry to survive, he said.
“If retail milk went up 10c/l, that would return farms to profitability,” Mr Cochran said.
“With the average person drinking 100l per year, that equals just $10 per year per person to have a viable dairy industry in northern NSW and Queensland.”
Farmer leaders from both NSW and Victoria are very concerned about other processors ‘following suit’ come June should Parmalat’s bid to reduce farmgate prices be successful.
President of the farmers group of NSW advocate organisation Dairy Connect, Graham Forbes, Gloucester, said all signs were showing farmgate prices should be strengthening, given production had come so far back and world prices were firm.
“The fact some processors are still trying to push the Victorian reductions through the system is very disappointing,” he said.
“We’ve seen no sign of the rally in global prices flowing back to the farmgate yet,” he said.
“A lot is riding on what happens in Queensland. It will be a game changer for the industry if those farmers are able to maintain their position.”
Mr Forbes said New Zealand farmers were predicting being paid over $6 a kilogram milk solids during the next financial year, a big step-up on the $4 range, where their price has sat for the last few years.
Victorian farmers appear to be looking for a price above $6/kg and northern NSW and Queensland producers say north of 60c/l is both realistic under current market dynamics and necessary for long-term sustainability.
Mr Forbes said the reality was the recovery of Murray Goulburn would be the most dominant factor influencing what opening prices were likely to be.