Milk price index abandoned

Milk price index abandoned


Dairy
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Federal Agriculture Minister David Littleproud said the Milk Price Index was ineffective and has this week scrapped the platform.

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The Coalition Government has abandoned its troubled retrospective Milk Price Index.

The index was a key 2016 election promise by then Deputy Prime Minister Barnaby Joyce in response to the 2015 retrospective milk price cuts.

But it was dogged by delays and faced criticism from farmers when launched on not delivering on its promise.

The Minister for Agriculture David Littleproud, who announced a review of the index in February, said this week it had not delivered farmers the market information it had hoped.

"Due to low rates of farmers inputting data, the retrospective Milk Price Index, which had been announced in 2017, was ineffective," he said.

Western Australian based dairy industry consultant Andrew Weinert is scathing about the inadequacy of the index.

"What was there, basically, it was useless to anyone," he said.

Farmers needed an index that compared their feed price to the price of their milk, as was available in the United States.

Mr Weinert said that in his view world prices set the farmgate milk price, and it was not difficult to calculate the farmgate price.

Mr Littleproud said the Coalition was now looking at a new trading platform to provide price transparency.

"I've since announced funding to create a modern trading platform for dairy more like grain and cotton farmers use, which records prices automatically and would provide real-time market information to farmers," he said.

Australian Dairy Farmers chief executive David Inall said the Milk Price Index was developed so that farmers had a more comprehensive understanding of price signals.

"But it has always depended on farmers recording their data on the platform to be effective, and it has not had the necessary traction with farmers," he said.

ADF supported the development of the dairy trading platform.

"Our view is that farmers should have as many options and tools at their disposal as possible and we support investigating this new approach," he said.

From the outset, farmers criticised the lack of detail on the milk price index website.

When it was launched Leongatha South, Vic, farmer Bernhard Lubitz said he had understood the index was to have given farmers an indicative milk price, that took into account the weighted international dairy commodity prices available less the processors' cost of production in Australia.

"That would have given farmers real clarity as to how much real value was being delivered or lost by the individual processor's product mix, milk supply profile and pricing structures," he said

The index was a pale watered-down imitation of the original proposal that did nothing for transparency.

It was a retrospective milk price index with an attached market report that was already available via a major rural bank's quarterly updates.

"What farmer participation in all this will achieve is questionable apart from if it fails it's not our fault," he said.

Just after its launch chief executive of lobby group, Dairy Connect, Shaughn Morgan described the index as 'half-baked' because it didn't provide analysis of the farmgate impact of the costs of processing.

Mr Morgan said the index's market analysis value was diminished by what it did not deliver.

"Producers need transparency around processor manufacturing costs and their impact at the farmgate," he said.

The troubled retrospective Milk Price Index has been abandoned.

The troubled retrospective Milk Price Index has been abandoned.

The Australian Competition and Consumer Commission in its review into the dairy industry identified the lack of price transparency as a key issue for farmers.

ACCC Commissioner Mick Keogh told the Trans-Tasman Dairy Leaders Forum on Monday processors held better information than farmers, including wider market knowledge at the farm, wholesale and retail levels.

Processors also had discretion over when and how this information was disclosed.

"Further, announced prices do not necessarily reflect actual prices," Mr Keogh said.

"Processors typically make uniform pricing offers to farmers and announce a single farmgate price at the start of the season.

"However, the prices received by farmers vary significantly from the announced price.

"Consequently, farmers are more likely to settle for an average offer rather than a better offer that might be available if they were better informed."

The story Milk price index abandoned first appeared on Farm Online.

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