Optimism with opening price but farmer confidence down

Opening milk prices have delivered an air of optimism for Gippsland dairy farmers, but latest Dairy Australia figures indicate farmer confidence levels are in decline.

Fonterra, Saputo and Burra Foods have all announced their opening milk prices within the range of $5.60 and $5.90 per kilogram milk solids, above the conservative opening prices of last year.

Burra Foods was the first to announce its opening milk price which will be in the range of $5.60 and $5.90 per kilogram milk solids, an eight per cent increase on last year’s opening price.

Saputo and Fonterra followed with their announcements last week of $5.75/kg milk solids and $5.85/kg milk solids respectively.

But, while Gippsland dairy farmers look set to benefit from increased milk prices in the season ahead, the latest Dairy Australia Situation and Outlook report showed local farmer confidence levels tracking downwards.

The Dairy Australia report last week included findings of the latest national dairy farmer survey.

Dairy Australia senior industry analyst John Droppert said poor spring conditions had hit global supply, putting upward pressure on commodity prices that was expected to flow through to the farmgate.

He said a dry late summer and autumn had driven up operating costs and was expected to limit the short term impact on balance sheets.

“Six months ago, a predicted oversupply coming out of Europe was weighing heavily on milk price forecasts, particularly for Gippsland and other export-focussed regions,” Mr Droppert said.

Poor seasonal conditions meant that oversupply never eventuated and, while risks remained, Mr Droppert said the global supply situation was likely to remain in check for some time.

“While any increase in milk prices will be welcomed at the farmgate, input costs have also risen due to seasonal conditions at home, with

A Warragul cyclist escaped serious injury after colliding with a car in Queen St, Warragul early Wednesday morning.

Police charged the 22-year-old Warragul driver with failing to give way.

The collision occurred at 6.05am. Police said the vehicle, travelling south in Gladstone St, approached the intersection at Queen St.

Police said the driver observed the cyclist travelling east in Queen St but thought he had enough time to make a right hand turn into Queen St in front of the cyclist.

The cyclist collided with the front of the vehicle, was thrown from his bicycle and across the front of the car.

The 47-year-old Warragul man suffered shoulder and rib injuries and was taken to West Gippsland Hospital. increased hay and grain prices eroding margins and creating some significant headwinds for the season ahead,” Mr Droppert said.

The national survey, undertaken in March, showed Gippsland was consistent with a national trend of sliding farmer confidence levels.

In Gippsland, 52 per cent of farmers remained positive about the industry, down from 53 per cent last year and 71 per cent early in 2016. Nationally, confidence levels had slipped to 47 per cent.

“Low farmgate prices was the main factor impacting on negative sentiment among Gippsland farmers, followed by high input costs and concerns around milk processing companies,” Mr Droppert said.

Despite decreased confidence, 73 per cent expected to make a profit in 2017/18, with 63 per cent recording a profit in the 2016/17 financial year.

Mr Droppert said, while Gippsland farmers’ confidence in the industry was falling in line with a national trend, they were more likely to feel positive about the state of their own business.

“Overall, farmers are happier with their own businesses but less so about the industry which is a reflection of uncertainty around the structural changes and that will take some time to settle,” Mr Droppert said.

Fonterra also upgraded its forecast closing range to $5.85 to $6.20 per kilogram milk solids for season 2018/19.

Fonterra Australia managing director René Dedoncker said the price reflected what the company can earn in the market.

“Our opening and upgraded forecast closing range are based on a continued positive global supply and demand outlook, coupled with more favourable currency movements.

“Demand is expected to remain strong, especially from China for milk powders and Japan for cheese…and the global dairy market’s current strong prices are expected to continue throughout the new season,” he said.

In April, Murray Goulburn’s farmer shareholders voted to sell the co-op’s seven factories and related assets and liabilities, including the Devondale brand, to Saputo.

In a letter to suppliers last week, Saputo Dairy Australia chief operating officer Kai Bockmann said the opening price would apply to southern milk region suppliers.

“This opening price represents our current assessment of expected market conditions for the coming year,” Mr Bockmann said.

“We believe it is responsible and allows room for upward movements if improved market conditions are realised throughout the year.”

Burra Milk Supply Partners will have the option of selecting either a 1:2 fat to protein ratio or the unique 1:1 fat to protein ratio at the start of the season.

In an innovative step, Burra is offering all milk supply partners the opportunity to be paid on a 1:1 fat to protein ratio, reflecting the strong market returns for fat.

“We have seen consistent strength in the demand for fat products across our product range and want to both reward and incentivise our supply partners accordingly,” said Burra Foods chief executive officer Grant Crothers.