June 27, 2023

Labour shortages on Australian dairy farms contribute to rising milk prices

Barry Irvin, the executive chairman of Australian-based Bega Cheese, said that labour shortages on Australian dairy farms are playing a role in the increasing prices of milk for households in the country, Financial Review reported.

According to Irvin, there has been a 9% decline in the volume of milk produced by dairy farmers across Australia in the past two years, amounting to a reduction of 700 million litres.

This decrease in supply has resulted in intense competition among all market participants, including private-label brand owners like supermarket chain Coles, as they vie for the limited milk available. As a result, farmgate prices have remained high, exacerbated by rising input costs and inflation.

While global dairy prices for commodities like skim milk powder have seen a decline of approximately 30% over the past three to four months, Irvin said that there is a "disconnect" between pricing in their branded products and bulk dairy commodities business segments.

As part of their evaluation process, the company is reviewing operations at dairy plants located in Koroit and Tatura in country Victoria to determine the full extent of write-downs across the organization.

Irvin stressed that competition among processors for milk throughout Australia will continue to be fierce, despite only minor consolidation of processing capacity thus far in the industry. He said that higher prices do not necessarily result in an increase in milk volumes, indicating the complex dynamics at play in the dairy market.

-      Financial Review