More mouths and less milk supports northern farmgate price

In parts of the USA and the UK - even in Nepal - milk is being dumped with retail outlets closed. This hasn't happened here and despite cafes and restaurants staying shut, sales of milk at the farmgate are strong.

The fact remains, milk production has come down, with farmers leaving the industry - more just this week in the Hunter - and drought and high feed costs have forced producers to cull cows.

Now that everyone is dining-in, dairy remains in high demand. Supermarket milk sales have never been so strong and consumers are happy to support home grown fresh milk.

CEO of lobby group Dairy Connect, Shaughn Morgan, says he has received phone calls from concerned consumers keen to buy the best - in order to sustain our farmers.

Meanwhile, there is worry that the high cost of grain, especially wheat, won't come off its price boil until - and if - harvest in six months' time.

New prices to be announced by all processors as defined by the new mandatory dairy code of conduct will be released at the same time in June.

There is optimism among suppliers of liquid milk that their existing prices will be maintained.

"It has to, if we want a sustainable dairy industry," says Richmond Valley producers and Dairy Connect delegate Terry Toohey, Padura Park, who believes fair value is "high 70s, early 80s" in terms of cents a litre.

"Right now we continue to have very high input costs and a lot of farmers are getting out of the industry. We won't see relief until after the grain harvest. In the meantime producers wear the cost of summer fodder crops baled for silage that won't be used for four to five months."

Stewarts River dairyman Tim Bale, architect of Manning Valley Fresh, says conditions remain ripe for success as a liquid milk supplier - which makes refreshing change.

Mr Bale diversified into real estate a few years ago to prop up dairy but suddenly under Covid-19 the tables have turned and dairy is the champion.

"Sure Australia is affected by a world price, especially in regions where milk is paid for its components, but in the end you can't get around Queensland's annual shortfall of 160 million litres," he said. "In NSW consumption demand versus production is close to line ball."

"The challenge is to hold the price we're getting. Dairy farmers need to hold that price in the mid 70s (cents a litre) at least or there won't be a viable dairy industry.

"This virus has highlighted food security," he said, noting there were new opportunities arising out of lockdown, like drive through sales of milk at McDonalds and at local bottle shops.

At Gloucester, Dairy Connect farmers' group president Graham Forbes said production remained down with demand up. Alternative markets, like live export, were helping to keep dairy families afloat.

His heifers remain on agistment in Victoria. A third will come home as replacements with the rest likely shipped to China as long as the price remains high.

In the south, dairy is looking at a different horizon, with the June price of milk sold on its components predicted to come in as low as 560c/kg, with rumours suggesting one processor might be prepared to come up to 700c/kg.

Dairy Connect CEO Shaughn Morgan says the price needs to be $11/kg.

Riverina dairyman Lachlan Marshall, who supplies Freedom Foods at Shepparton, which makes UHT for domestic and export, accepts the concern about overseas influence on Australian prices but remains confident that domestic sales will support farmers, considering the milk supply problem to his north and a less than productive autumn peak at home.

"We also have shortages of milk in the south," he said. "Most regions did not hit their autumn peak. Australia is almost at parity with the dairy we produce."

A lack of heifers after last year's sell down will maintain lower production for some time.

"It was scary the numbers of animals sent to slaughter last year," he said.

"And heifers sent to China - there was an ocean of young cattle that were exported out of the country."