What needs to happen regarding milk pricing and structures? All farmers must be paid the same $/kg milk price for their solids regardless of farm size
· The banning of milk swaps .The only exception being plant or transport breakdowns
· All opening prices submitted to an independent third party (Dairy Australia) one month prior to the start of the new season. Then announced on the same day via that third party.
· The removal of all forms of special payments, eg production incentives, growth incentives, sign on payments, loyalty payments etc from the milk payment system and structures.
· All retrospective step up payments to follow the farmer supplier if they leave mid season (just like superannuation).
· The removal and banning of the term loyalty bonuses for all mid season price increases or step-ups.
· All processors to offer a 3/9 or a flat milk pricing model.
· Not more than a 15 -cent KG/MS pricing differential between the processors various pricing structures for milk that the farmers supplying that company receive
· Milk quality being the only real pricing differential between farmers milk price supplying the one processor.
· Milk payment on just plain solids produced. Not a ratio of fat to protein related to the average weighted milk price, a simple 1to1 ratio
All payments to farmers finalized within 30 day of the close of the season.
Milk swaps are a cancer on the industry and should be band. The are touted by processors as bring efficiencies to milk pick up and transport to reduce costs and deliver higher milk prices. How can it be that in Vic a processor that only has processing in the west, can come in pinch supply from one processor in the east, and then swap that milk with a processor that also has a processing plant in the west? Even when that milk was taken from that processor because they paid a higher price for that milk and had a different payment profile? They are anti competitive and a form of price manipulation and destroy processing efficiency unless the milk goes into a global supply pool and is that what the processors want? Answer no they don’t want a global pool, they want the bits that suit them and not what would benefit the farmer and the whole industry. Again the horizon 20-20 report says it all. Instead of growing the industry and getting world class processing the processors just keep pinching milk from each other from a shrinking milk pool. So in a sense we do have a global supply pool but it’s just hidden. It lets them over fill factories and not be responsible for that over capacity to the determent of farmers
Milk swaps don’t work they bastardise the market for milk. They disrupt a well run and functioning market for milk and send distorted market signals and compromise a well run processing sector with each company functioning on an independent bases and playing to their strengths. What happens is a processor cannot for whatever reasons get more milk from there natural supply area so goes to the other side of the state to disrupt his competitors. They do this by selectively picking of the best of their competitors suppliers (the low hanging fruit) mostly on ease of access, good roads, herd size ect with the full knowledge that they will just swap the milk with that processor. They have no real long-term commitment to the region but it just makes short-term business sense. Leaving the processors with the higher cost supplier
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