Untangling how much farmers are paid for milk

The most anticipated email of the year popped into my inbox just before midnight. It was our co-op’s announcement of its opening milk price: “a weighted average price of $4.90/kg milk solids”.

Ironically, farmers are not paid for milk – just the fat and protein it contains, which we call “milk solids”.  Here’s the tricky part: protein is 2.5 times more valuable than fat, different herds (and the individual cows within them) produce different ratios of both, the price per kg changes almost monthly and the amount each cow makes shifts throughout her lactation and as her diet changes.

We are also subject to charges based on how often our milk is collected, if milk quality drops, and even milk volume.

For all these reasons, the price a farmer receives for a litre of milk is as individual as the farm.  To further complicate the picture, the co-op introduced  a new payment system last year that allowed farmers to select from three pricing models reflecting different pattens of production over a season.

I opted for the Domestic Incentive and committed the farm to supply at least 40% of our milk between mid-February and mid-August. It was the right decision at the time but that record-breaking wet summer affected the normal pattern of supply. With just one tanker of milk to be collected, it’s touch and go. About the same amount as the cost of my tractor engine rebuild is riding on how well the girls milk tonight. Wish me luck!

PS: The pricing system I’ve described applies only to our co-op. Other farmers, particularly those interstate, may have radically different structures.