DRAMATIC falls in the global dairy price could hit farmers in the Murray Dairy region hard, with mid-season drops in the farmgate milk price on the cards.
Major milk processor Fonterra warned farmers on Thursday of a potential lowering of its farmgate price in light of a rapid fall in global dairy prices.
The Global Dairy Trade index–recognised as the main price indicator in dairy prices globally–registered massive falls in July, taking prices to their lowest levels in 13 years.
The price is also the lowest since the index was established in 2008.
Fonterra Australia managing director Judith Swales said the company was reviewing its farmgate price and forecast closing price as sluggish international conditions continue.
“Global milk prices are now trading at their lowest levels since 2002 and oversupply remains an issue, as does weak demand,” she said.
“This is not an issue isolated to Fonterra. This is an issue being faced across the Australian and global dairy industries.”
Murray Gouldburndid not return calls from theBendigo Advertiserabout whether the price fall could impact suppliers near its Rochester processing facility.
Other large dairy processor Bega had also not publicly discussed the drop in global milk prices.
Fonterra’s opening milk price of $5.60 kilogram milk solids was reflected across the industry, and would remain at the level for the time being, Ms Swales said.
But a drop in price during the current season remained a firm possibility.
“Although Fonterra is maintaining its current farmgate milk price in this review, suppliers need to be prepared for the possibility of a step down in milk price this season,” Ms Swales said.
The dairy processor expected prices to recover over the course of the season, but conceded it was likely to be a tough season for its farmers.
The price drop is not expected to have an immediate effect on consumers, with consumer milk prices not predicted to fall until later in the year.
Earlier this month, Fonterra cut the amount it will pay its New Zealand farmers from NZ$5.25 to NZ$3.85–a 27 per cent reduction.
The economic slowdown in China, an import ban in Russia and the rising supply from Europe and the United States are regarded as the main reason for the drop in price.
– with Alex Sinnott
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