Sub topics

• Benchmarking
• Milk Price
• Land Prices
• Stock Prices
• Agistment Rates

Milk Price

Basis of Payment

Milk prices paid to farmers are determined on the basis of milkfat, protein and volume:

Payment = milk fat ($/kg) + protein ($/kg) - volume charge (c/L)

The payment is calculated on daily production and normally paid by the 15th of the following month. Price schedules vary by month with higher prices during the winter and lower prices in the spring. There are incentives for better quality milk and penalties for poor quality.

Generally there is an opening (base) price schedule established at the start of the season with step-ups paid during the year depending on market conditions.

Some companies have contracts that specify the amount of milk to be supplied each month or in total. The largest company (Fonterra) is encouraging increased production and pays incentives for total quantity (favours larger herds) and for growth in production over time.

Milk Prices

The graphs below show milk prices in recent years in cents per litre and in dollars per kilogram of milksolids (milkfat + protein) and an estimate of the price for 2007-08 assuming a 30% increase over 2006-07.

The final average price for the 2006-07 year was slightly lower than for 2005-06.

Milk Price Outlook

Tasmania's milk price will continue to be largely dependent on world market conditions.

The Australian Bureau of Agriculture and Resource Economics (ABARE) expects that milk prices will continue to rise through to 2008-09 (Outlook Conference, 2007):

• High prices in recent years have been driven by constraints to growth in the three main exporters (EU, NZ & Aust.) at a time of rising global demand
• The current drought in Australia will limit total production in 2006-07 and 2007-08
• Poor seasonal conditions have also been evident in New Zealand
• There has been heat and drought in the EU, and CAP reforms have reduced incentives to produce milk
• On the other hand increased supplies are expected from emerging exporters such as Argentina and the Ukraine, while China's dairy production (mainly for domestic consumption) continues to rise

From 2008-09 to 2011-12 growth in production for all major exporters is expected to exceed growth in demand and this is expected to put downward pressure on prices.