Milk price hike: Aussies set to pay 30 per cent more for their milk due to inflation and shortages

Milk prices could soar well above inflation due to crippling staff shortages, forcing some farmers to stop producing altogether.

Flooding and prolonged wet weather in farmlands in New South Wales and Queensland have also caused widespread damage to machinery and fences, as well as the spread of disease in paddocks.

The end result is that milk production is halved in some areas, driving up the wholesale price of the increasingly scarce product.

Tasmanian and Victorian farmers have suffered a similar fate, with persistent labor shortages also contributing to a widespread decline in production, on top of the high costs of electricity, diesel fuel and fertilizer.

Michael Harvey, senior dairy and consumer nutrition analyst at Rabobank, said there have been a number of significant challenges through concept and market cycles over the past decade – leading many farmers to decide ‘enough is enough’ and close their doors.

This has a “huge impact on milk price and profitability,” he explains to 2GB’s Ben Fordham.

“Then you move fast to where we are now, obviously there are some challenges,” he said.

Persistent labor shortages have led to a widespread decline in production, while there are also high costs for electricity, diesel fuel and fertilizer (photo, a dairy farmer in Rochester, Victoria)

“What we have at the moment is very high milk prices for farmers, so the price they’re getting for their raw material is at record levels and that’s a good thing for them because it comes in that high production cost environment.

“We see that industry going through a significant transition period … we see farmers leaving industry for other enterprises because of the labor shortage.”

One listener, a dairy farmer, told Fordham that everyone could soon see the milk price rise by 30 percent.

“The dairy farmers face high milk costs, so the price they pay for their milk, but they also pay a lot more for packaging and distribution,” said Michael Harvey, senior dairy and consumer nutrition analyst at Rabobank. Ben Fordham on Wednesday

“What we’re seeing is high production costs embedded in the dairy supply chain, so farmers clearly have that high cost of feed, their fertilizer and their fuel,” said Mr Harvey.

‘The dairy farmers have to deal with high milk costs, ie the price they pay for their milk, but they also pay a lot more for packaging and distribution.

“So everything from getting it from the farm to the consumer comes in at a very high cost.”

Mr Harvey said they see retail prices for dairy products continue to rise and the CPI figures from the end of June show that there was inflation in the dairy aisles.

Mr Harvey said dairy retail prices continue to rise and late June CPI figures show there was inflation in the dairy aisles (pictured, a supermarket in Melbourne)

Another listener explained that Australian farmers have produced 350 million liters less milk than usual in the past financial year, leaving supermarkets without the stock shoppers are used to.

When asked if a 30 percent price hike is likely, Mr Harvey said, “That’s probably where things end by the time we get through this cycle. Because it depends on the product, the category and the period you are looking at.

“But so far we’ve seen prices move by double digits and you certainly can’t rule out a further increase.”

“So hopefully over the next 12 months we will see some stability returning to that milk pool as there are good milk price signals,” said Mr Harvey.

He did offer some hope, though, saying shoppers would likely see some improvement over the next year, but that depends on the weather and the possibility of a few more wet months thanks to the country’s third consecutive La Nina event.

“But there are those risks that we see further disrupting as it’s a bit challenging on farms at the moment,” added Mr Harvey.

Meanwhile, shoppers have received a lot of good news, with prices of popular products, including iceberg lettuce, tomatoes, strawberries, peppers and berries, returning to ‘normal’.

At its peak, iceberg lettuce $11 a head is now $2, tomatoes have fallen from $9.90 a kilo to $7.90, strawberries $11 a tray to just $2, and peppers from $15 a kilo to $11.

Prices of popular products, including iceberg lettuce and strawberries, will return to normal. At its peak, iceberg lettuce $11 apiece is now $2, tomatoes have fallen from $9.90 a kilo to $7.90, strawberries $11 a tray to just $2, peppers from $15 a kilo to $11