Australian Dairy Farmers Face Crisis Amid Rising Costs and Low Prices

In a challenging economic landscape, Australian dairy farmers are confronting a significant crisis as they grapple with increasing production costs and persistently low milk prices. According to the Australian Dairy Farmers president, Ben Bennett, the opening prices for milk this season, ranging between $8.40 and $9.20 per kilogram of milk solids (MS), fall short of the necessary $10/kg required to sustain operations amid severe droughts and floods affecting nearly half of the nation's dairy farmers. With the average price received in the previous year hovering at $9.79/kg MS, the current offers represent a concerning decline in profitability.

The current situation is exacerbated by the impacts of recent natural disasters, which have forced many farmers to make difficult financial decisions, including the sale of cattle to afford feed. Michael Jeffery, chair of the Norco cooperative, reports his farm in northern New South Wales suffered extensive damage from flooding, costing him an estimated $1.1 million in repairs and lost productivity. "This is not just about numbers; it’s about livelihoods and communities," he stated.

The Dairy Code of Conduct, effective since 2020, mandates that processors disclose milk supply agreements and minimum prices by the first business day in June. However, many farmers argue that these prices do not reflect the reality of their operational costs, with the major processors and supermarkets often undervaluing milk. Joe Bradley, president of eastAUSmilk, expressed that prices below $9/kg are unsustainable and fail to account for the soaring costs of hay and feed, which have skyrocketed recently.

Industry analysts, such as Michael Harvey from Rabobank, anticipate that while the current prices are disappointing, there may be upward movement as the season progresses. "The actual milk production doesn’t start until the spring peak, and if market conditions improve, we may see adjustments to prices," Harvey noted.

The broader context reveals a worrying trend; the number of registered dairy farms in Australia has plummeted from 6,308 in 2014 to just 3,889 in 2024, indicating a 38% decline in the industry. Despite these challenges, dairy remains Australia's third-largest rural industry by farm-gate value and export, following red meat and wheat, according to Dairy Australia.

The implications of this crisis are profound, affecting not just the farmers but also the rural communities that rely on the dairy industry for economic stability. As farmers continue to voice their concerns over pricing fairness and sustainability, the future of Australian dairy remains uncertain amidst rising operational pressures and market volatility.