In­dus­try short­age fails

Un­like the veg mar­ket, a na­tional milk shorage isn’t re­sult­ing in a price in­crease

Gatton Star - - INTO RURAL - DO­MINIC ELSOME do­[email protected]­ton­

DAIRY farm­ers have strug­gled in the past two decades and al­most any­one in the coun­try knows just how dam­ag­ing low milk-prices have been for farm­ers.

But while $1-a-litre milk might be a thing of the past, the in­dus­try is fac­ing an­other cri­sis that isn’t as well know – a mas­sive short­age of milk.

Glenore Grove dairy farmer Luke Stock told the

Gat­ton Star the milk short­age was huge – the do­mes­tic an­nual sup­ply needed to ful­fil the de­mand in the state of Queens­land was 650 mil­lion litres a year. Presently, the in­dus­try is pro­duc­ing just 330 mil­lion litres.

Yet de­spite the huge short­age, both farm-gate and shelf prices aren’t ris­ing as you would ex­pect them to.

“You would think, when you look across other in­dus­tries … when they have a short­fall, sim­ply through sup­ply and de­mand the price in­creases,” Mr Stock said.

“But that doesn’t seem to hap­pen – that doesn’t seem to flow through in the dairy in­dus­try.”

The jersey cow farmer said long-term milk con­tracts be­tween pro­ces­sors and su­per­mar­kets not al­low­ing price in­creases was a part of the prob­lem.

The other fac­tor was con­sumers con­tin­u­ing pref­er­ence for home-brand milk, which meant branded milks couldn’t raise prices too far be­yond their com­peti­tors.

“Pro­ces­sors, make very lit­tle money on un-branded milk and they rely on branded milk sales to make their money,” he said.

Since $1/L milk ended and home brand prod­ucts rose in price by about 30c/litre, Mr Stock es­ti­mated farm­ers on av­er­age have only seen an ex­tra five to eight cents/l

The short­age of milk is down to a num­ber of fac­tors, but the two big­gest rea­sons are the huge de­crease in Aus­tralian dairy farm­ers and the drought.

In 2011, there was about 1100 farms in coun­try. To­day is close to 300. Drought has also slammed sup­ply, with in­crease feed prices, some­times as high 70 per cent dearer, and re­duced herd num­bers cut out a lot of the in­dus­try’s pro­duc­tion.

The short shelf life of milk also had an im­pact, both on the sup­ply and the price farm­ers re­ceived for their prod­uct, with pro­duc­ers un­able to hold sup­ply for bet­ter prices.

“If you look at a grain grower – he can he can take his crop off, and he can store it for what­ever term that he needs to un­til the mar­ket suits him,” he said.

“We can’t do that – our milk gets picked up daily and we’ve got a prod­uct that can’t be stored. We are re­ally the great­est ex­am­ple of a price taker that there is - we’re un­able to set our price.”

As for the fu­ture, Mr Stock isn’t sure, but doesn’t be­lieve the long-term con­tracts pro­ces­sors signed are likely to be around much longer.

“I don’t think long term con­tracts will re­ally ever present them­selves again within the in­dus­try,” he said.

Pic­ture: Do­minic Elsome

NO CHANGE: Glenore Grove dairy farmer Luke Stock hasn’t re­cieved any ex­tra in­come de­spite a na­tional milk short­age.

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