A breakthrough in milk price transparency and buyer competition has been made, Australian Dairy Farmers (ADF) said, when the Australian Milk Price Initiative (AMPI) ran its first regional milk spot markets.
The market was launched on 3 March on the Mercari platform, owned and operated by Mercari Pty Ltd. Various bids across the three regions of Victoria were made with prices exceeding $9.00kg/ms for the spot market. Individual months in the new season traded above $8.00kg/ms.
“These are very positive signs,” ADF president Rick Gladigau said.
Regional spot markets deliver the monthly price transparency necessary to enable a forward hedging market like those seen in New Zealand, the US and Europe. Such markets enable dairy farmers and processors to lock in prices up to three years forward for some of their milk.
“There is no more transparent price signal than an open market price,” Gladigau said. “AMPI will improve risk management across the supply chain with back-to-back pricing from customer to processor to farmer, providing the ability to lock in margins across the chain.
“Better margin and risk management enables better planning, which, in turn, drives investment and growth across the supply chain. More investment in the supply chain means a strong dairy industry.”
In 2019, the federal government provided ADF with an election pledge of $560,000 towards the development of a milk trading platform. This initiative was key to the Australian Dairy Plan’s commitment to deliver new measures to increase transparency and help manage market risk, including the establishment of a functioning milk price market.
“While the launch of the AMPI is an important step, the work is not over yet,” Gladigau said. “Effort is required in the future to ensure appropriate governance and operations and there is a well-designed education or extension program delivered to farmers and processors on how to participate in this or other trading initiatives and how this makes a difference to their risk management and bottom line.
“Ongoing investment and innovation are key to the future of the dairy industry. With an open market where farmers can choose who they sell their milk to, at what price, and on what terms the future is looking brighter.”
The dairy market will be available 2.00-2.30pm (AEST) on two Thursdays of each month. Information and access to the market can be found here.