International Farmgate milk prices US$ per 100kg

This graph kindly supplied by Dairy Australia (please click on the link to see it) shows that Australian dairy farmers are enjoying their best prices in a long time. I haven’t rushed out to put a deposit on a BMW for five very important reasons:

1. The US dollar is incredibly weak against the Aussie dollar, so the high price is not translating to an equally high pay packet in our terms.
2. Our costs, especially fertiliser and power, have increased dramatically in the last five years.
3. I’m playing a game of catch-up. When prices are low or seasons are unfavourable, we put off spending on necessities like cow tracks, fencing and emptying effluent ponds but we can’t put that off forever!
4. We’ve had the autumn/winter/spring from hell and that’s cost a fortune in feed.
5. Even if I had the money for the Beemer, I’d be too scared to spend it in case the global economy forces a repeat of 2009, when our price dropped 40% almost overnight.

Given that half of our milk is sold on the volatile international market, nothing’s  guaranteed in Victorian dairying except that the cows need to be milked and fed and you never know what’s around the corner.

Why have Australian farmers received such a low price for our milk for so long, you ask? First, we produce a lot more milk than our domestic market can consume, which means our milk needs to be sold on the highly competitive international market. Second, the US and European Union have subsidised their dairy industries, creating an artificially low international price. The so-called “butter mountain” was sold at unsustainably low prices for many years.

More recently, the political appetite for subsidisation has waned and this has helped Australian dairy compete – while still hardly a level playing field, it’s not quite so tilted against us.