Price rise welcome but not enough

28 Jun, 2012 02:00 AM
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Western Dairy chairman Dale Hanks.
Western Dairy chairman Dale Hanks.

IN welcoming a milk price rise, dairy farmers say more is needed if the industry is to remain viable.

Dairy company Lion (formerly Lion Nathan National Foods) increased its milk price paid to farmers by one cent a litre recently.

The increase will see the base price Lion pays rise to 46.8 cents a litre.

The company listed a number of issues such as the drought experienced in WA in 2010, along with the collapse of Challenge Dairy and low farmer confidence, as impacting on herd numbers and WA dairy farming businesses.

One WA dairy farmer who supplied Lion and wished to remain anonymous, said the announcement didn't amount to much.

"At the same time last year the company took a cent a litre off us," he said.

"All it does is put us back to where we were two years ago."

He said the price increase came in the face of increased costs, thanks to the carbon tax coming in on July 1 and a wage increase dairy producers will be forced to pay workers.

"The increase still puts us a long way behind the eight ball," he said.

"A cent a litre isn't going to stop someone who has made up their mind from getting out of dairy farming, due to financial constraints.

"It's ridiculous that processors are mucking around with announcements of one or two cents a litre."

Lion agriculture procurement director Murray Jeffrey admitted it had been a tough couple of years for WA dairy farmers.

"On-farm confidence is at a real low, so the announcement will hopefully lift confidence and give farmers some relief at the farmgate," Mr Jeffrey said.

With talk from within the industry that WA dairy farmers needed an increase of five cents a litre to keep milk production at sustainable levels and an extra 10c/litre if the industry was to see any growth, many see the increase as trivial.

But Mr Jeffrey said the current price the company offered was in front of the market.

"We admit that one cent a litre is not what everyone wants, but it goes a long way in restoring confidence back in the industry," he said.

Mr Jeffrey said the tough retail environment processors had been facing over the last year hadn't gone away and there were still some real challenges in the WA dairy sector.

"These are things we are going to have to work through, to ensure there is a sustainable supply chain in the future," he said.

"Looking to the future, we run a domestic operated business revolving mainly around a domestic market.

"We want to make sure we have got good quality farmers, that are there for the long term, so both businesses can benefit into the future."

Through generating savings by out-sourcing logistics and changing the way the business is run, Lion said it had been able to find more money in the supply chain to share around.

"Those sorts of initiatives are something that we always work on, because we like to be an efficient operator," he said.

"The outsourcing of logistics has helped and as a result we have been able to pass that saving back to the farmer."

Mr Jeffrey confirmed rumours that Lion had looked at sharing logistical costs with other dairy processors, but said the reality had panned out differently.

"We have gone with an individual contractor but, we are still looking to others to expand that over time," he said.

"Anything that creates a net value added into the full dairy supply chain, is something we will certainly consider.

"We believe there is a good opportunity to align logistics in the future."

Mr Jeffrey said in the current situation three separate dairy farms on one road may be visited by three different dairy company trucks.

He said aligning the situation to one truck picking milk up and taking it to one destination, was the most efficient way to collect milk.

But he said the industry still had a long way to go before getting to that level.

"We are certainly keen and have been trying to drive that over the last six months," he said.

With WA dairy farmers looking for long term signs of confidence and the sustainability of the WA industry, Mr Jeffrey said Lion was in the same boat.

"WA dairy farmers are selling a lot of heifers so the milking volume isn't coming through, everyone wants fresh milk available every morning and we're trying to ensure that," he said.

Western Dairy chair Dale Hanks has welcomed Lion's move to increase the price it offered its WA milk supplliers, saying it was a step in the right direction.

With the hope that other dairy processors would follow suit and offer better farmgate prices, Mr Hanks said the industry welcomed any competition to drive the milk price up.

"It's a pity the increase wasn't around the three or four cents a litre mark," he said.

"While any improvement on the milk price is good, the announcement by Lion barely touches the sides of what is needed for the industry," he said.

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READER COMMENTS

2012 year of the farmer lost
28/06/2012 7:47:26 AM, on Farm Weekly

Murry Jeffrey you are living in la la land! "the base price" is fiction. A price based on unrealistice numbers designed by processors to falsify a higher then true value paid to farmers. I suggest he recalculates his figures because lion are NOT in front of the market. I'm affraid their is very little confidence in the industry while the processors pay their farmers pittance and announce insulting price rises.

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