A dairy industry insider is predicting tough times in coming months with the opening price for milk solids expected to drop about 25 per cent.
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Former Warrnambool Cheese & Butter managing director and chief executive officer John McLean made it clear he didn't want to predict what the opening prices would be but agreed the figure would start with a seven.
The price last year for a kilogram of milk solids was about $9.50 and is expected to be about $2 cheaper this year.
Mr McLean predicted two years ago in The Standard that Australia would become a dairy importer and that assessment proved correct this week.
On Wednesday, May 8, 2024, he said Australia had imported 350,000 tonne of dairy products - butter, cheese and ice-cream.
"And that number is increasing," he said after it was revealed Australia imported more cheese now than it exported.
"I don't want to be an alarmist but there are dark clouds on the horizon.
"If a dairy company was supplying the export market they would be getting paid a price with the number seven in front of it."
McLean said it was fortunate all the large dairy companies in Australia had a significant foothold in the domestic market.
He said home brands were noticeably cheaper in supermarkets than those of the Australian dairy producers.
"Dairy farmers and processors have a lot in common at present," Mr McLean said.
"They are facing increased prices for power, fuel and detergent as well as rates and wages.
"Those increases have been an absolute whack.
"Everyone is trying to maximise returns to farmers but it's going to take some doing to enjoy the same price they have for the past 18 months - which has provided a reasonable return for some time."
The former CEO said dairy companies with milk powder dryers faced steep rises in the cost of gas.
"And that's just one example," he said.
"There's not too many positive signs. For the sake of dairy farming I'm hoping the dairy industry can wade through the current position, but everyone is going to face challenges."
Mr McLean said farmers were also facing an uncertain short-term due to dry seasonal conditions with minimal rain since January.
"Farmers are facing a season they have not faced for some time," he said.
"The price of hay is through the roof. A well-known hay provider is now finding it hard to source feed at any price - and some of it is three years old and of very poor quality.
"Every farmer knows the cheapest feed is off your own property but there's been no rain. A lot of seed has been sown but we haven't had the rain to kick it off."
When it was suggested the milk price could open at $7.50, Mr McLean said he hoped "it didn't go that far".
"But home brands are already outstripping local brands," he said.
"Five years ago there were three dairy companies in the south-west of Victoria. There are now 15, 16 or 17 so-called dairy companies, who are really brokers.
"They have to on-sell and that market drying up is going to have an impact - exactly what that impact is remains to be seen.
"But it is going to be a very challenging environment."
On May 2, Saputo Dairy Australia, which has a factory at Allansford, offered an early guidance range for the 2024/25 season of between $7.80 to $8.00 kgMS.
The reduced price is due to ongoing global and domestic market volatility and anticipated market returns.
Opening prices are expected to be announced by Australian companies in early June.
