Academics at Charles Sturt University (CSU) have weighed into the Murray Goulburn milk price debate, condemning the dairy processor for failing to adjust to a changing global dairy market.
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NSW dairy producers, who primarily supply the domestic liquid milk market, have been crippled by last month’s six cents per litre cut to the farm gate milk price (FMP), after their Victorian counterparts suffered a cut of more 60 cents per kilogram of milk solids (kgms) earlier this year.
Controversially, the price cut to southern region suppliers has been back-dated to July 2015, with farmers being made to repay the money they were overpaid. At the same time, many are now being paid below cost price for their milk.
In a statement, a spokesperson for Murray Goulburn said the price cuts resulted from a fall in global dairy commodity prices.
“Global dairy commodity prices are trading at unprecedented levels, they have been lower for much longer now than anyone expected – below $3000 a tonne for some 24 months,” the spokesperson said.
“MG is responsible for almost 50% of Australia’s dairy exports and we therefore have a significant exposure to global market conditions.”
Despite supplying the domestic market, the NSW dairy market is subject to price competition because milk in Australia is regularly transported between states, the spokesperson said.
“Fresh drinking milk accounts for only 25 per cent of Australia’s milk supply [according to Dairy Australia],” they said.
“Although an important market segment, fresh drinking milk does not drive the farmgate milk price – it is driven by export prices.”
But Michael Campbell, a lecturer in farming systems in CSU’s School of Animal and Veterinary Sciences, said Murray Goulburn should have reacted to movements in the market earlier.
"While the drop in milk prices had been on the cards for a long time, what Murray Goulburn did was ignore the fundamentals of the world dairy market and continued to tell farmers they could pay them $6 per kilogram of milk solids by the end of the current 2015-16 season and, as a result, that they should expand their businesses,” Mr Campbell said.
"The dairy processor should have just been honest and stepped the price down at the start of 2015.
"In a staged price reduction farmers would have been able to adjust their production system to remain profitable."
