A PRICE rise in dairy products is on the way, with the cost of milk at the farm gate tipped to rise as much as 20 per cent.
The nation’s milk buyers are expected to set new prices next month, with the drought forcing costs up.
Australian Dairy Farmers is expecting a price rise of between 10 to 20 per cent on wholesale milk, with a cost flow-on to retail dairy consumers.
The projection comes as the world’s biggest dairy exporter, New Zealand-based Fonterra, forecasts a 27 per cent jump in the prices it will have to pay dairy farmers for their milk this year.
Australian Dairy Farmers president Allan Burgess said price rises were not expected to be as steep in Australia but would be welcomed by farmers.
“That’s great news and we would expect something like that to happen in Australia,” Mr Burgess said.
“The trend will be up because they’re (buyers) all working from the same world and domestic markets, but to what extent will be up to the companies.”
Mr Burgess said the cost increases were caused by production shortages brought on by the drought, a strong world economy and demand from oil rich countries.
In 2002, Australia produced 11.2 billion litres of milk, with production projected to increase to 13 billion litres this year.
But early estimates tipped it would fall well short at 9.3 billion litres, Mr Burgess said.
He said every one billion litres of milk lost was $1.5 billion out of the pockets of farmers.
But even if prices rise, farmers would still be short changed.
“Even at these kinds of levels, it’s unlikely to offset the high cost of production,” Mr Burgess said.
Fonterra managing director of global trade Kelvin Wickham said global supply was under pressure from a number of factors, including the Australian drought.
“We saw the Australian drought impacting on availability for the world supply, declining milk supply in the US (and) a decline out of South America in the first four months of the year,” Mr Wickham said.
“Progressively from the end of this calendar year into 2008, consumer prices will need to move up across Asia and I suppose even in Australia and New Zealand in the liquid milks and the products which have a heavy percentage (of milk) in the final consumer products.”
