For quite a while now, QDO has been in talks with both NSW Farmers Federation, Dairy Connect and United Dairyfarmers of Victoria, working behind the scenes to make some real changes for the industry. And we're targeting the retail price of milk.
What difference can the retail price make to the farm gate price paid to our farmers?
A lot.
I don't have a degree in economics, but I do run a business and I get how a properly functioning value chain works. If we want to help our farmers get a sustainable farmgate price, we need the consumer to pay more, so the retailers can take a modest cut, then the processors and finally, what is left goes into the back pocket of our farmer.
The reason that $1 litre was such an economic catastrophe for the dairy industry was that it meant there was no profit margin for anyone in the value chain. Having a two-tiered pricing structure for fresh milk has become an economic reality in Australia and we appreciate that there are Aussie shoppers out there who need to buy discount. But the lowest retail price must allow for reasonable margins at every stage of the value chain.
The retail price for fresh milk must start at $1.50 a litre.
The figure is not simply a nice round number, it is based on how a properly functioning value chain should work. In Queensland, farmers are likely looking at a CoP of around 72 cents/litre in SEQ this year. Taking on board CPI as well, dairy farmers need something between 72-76 cents/litre to be making a modest profit. There will be regional variances to CoP, but as an average for farms producing for the domestic fresh milk market, these figures give a good indication of the state of play.
With a discount retail price of $1.50 all players can make reasonable margins and the Australian consumer can have a degree of confidence that they'll be able to drink fresh Aussie milk in the years to come.
