Farmers stuck with low prices during national milk shortage
DAIRY farmers have struggled in the past two decades and almost anyone in the country knows just how damaging low milk-prices have been for farmers.
But while $1-a-litre milk might be a thing of the past, the industry is facing another crisis that isn't as well know - a massive shortage of milk.
Glenore Grove dairy farmer Luke Stock told the Gatton Star the milk shortage was huge - the domestic annual supply needed to fulfil the demand in the state of Queensland was 650 million litres a year.
Presently, the industry is producing just 330 million litres.
Yet despite the huge shortage, both farm-gate and shelf prices aren't rising as you would expect them to.
"You would think, when you look across other industries … when they have a shortfall, simply through supply and demand the price increases," Mr Stock said.
"But that doesn't seem to happen - that doesn't seem to flow through in the dairy industry."
The jersey cow farmer said long-term milk contracts between processors and supermarkets not allowing price increases was a part of the problem.
The other factor was consumers continuing preference for home-brand milk, which meant branded milks couldn't raise prices too far beyond their competitors.
"Processors, make very little money on un-branded milk and they rely on branded milk sales to make their money," he said.
Since $1/L milk ended and home brand products rose in price by about 30c/litre, Mr Stock estimated farmers on average have only seen an extra five to eight cents per litre.
The shortage of milk is down to a number of factors, but the two biggest reasons are the huge decrease in Australian dairy farmers and the drought.
In 2011, there was about 1100 farms in country.
Today is close to 300.
Drought has also slammed supply, with increase feed prices, sometimes as high 70 per cent dearer, and reduced herd numbers cut out a lot of the industry's production.
The short shelf life of milk also had an impact, both on the supply and the price farmers received for their product, with producers unable to hold supply for better prices.
"If you look at a grain grower - he can he can take his crop off, and he can store it for whatever term that he needs to until the market suits him," he said.
"We can't do that - our milk gets picked up daily and we've got a product that can't be stored.
"We are really the greatest example of a price taker that there is - we're unable to set our price."
As for the future, Mr Stock isn't sure, but doesn't believe the long-term contracts processors signed are likely to be around much longer.
"I don't think long term contracts will really ever present themselves again within the industry," he said.
"I think processors have possibly being burned in the past by offering long term contracts.
"So, in my opinion, I don't think they have a place within our industry."