UDV president Adam Jenkins said the index should allow farmers to make more informed judgements on the fairness and competitiveness of prices offered by their processor, and also provide earlier and clearer pricing signals.

But Mr Jenkins said the index would fall short of providing transparency in the processing sector.

“With the index, we’ll have information about the world market and farm gate prices, but we’re still lacking transparency into manufacturing costs and their impact at the farm gate.

“UDV advocates for transparency throughout the entire supply chain and we are disappointed the Milk Price Index does not achieve this.

“We would like to see analysis of manufacturing costs to give farmers a clear idea of how the world price translates into farmgate milk prices” Mr Jenkins said.

The peak national dairy farmer advocacy group, Australian Dairy Farmers (ADF), said the index would provide independent and transparent market information to dairy farmers.

ADF president Terry Richardson said the index aimed to help farmers make decisions about their businesses.

“This is just one tool that dairy farmers can use, and there will be a feedback channel available to allow an opportunity for input into any future adjustments that may be deemed necessary in the future."

The index will be supported by a one-year forecast of prices that will be updated quarterly, along with regular global, national and regional commentary.

A Regional, Retrospective Farmgate Milk Price Index will accompany the index, with farmers urged to provide price data via an online form.

“The purpose of the retrospective index is to help build a marker of actual prices received in each dairy region,” Mr Richardson said.

The Milk Price Index is being managed by the Department of Agriculture and Water Resources, with economic modelling and analysis conducted by Deloitte Access Economics.

Education material is being produced by RM Consulting Group, which will be delivered to farmers at dairy industry events.

“The index will include an awareness and education component to help dairy farmers understand what the index means for them and how they could consider it in their business planning,” Mr Richardson said.

“The Government is very interested in engaging with farmers to improve the index over time and is encouraging people to email their feedback to the Department.”

Farmers can access the index at http://www.agriculture.gov.au/milkpriceindex.