Rising Costs Threaten Australia’s Dairy Industry
Australian dairy farmers are sounding the alarm as they warn that the price of a key household staple—milk—is set to rise sharply. This comes amid growing concerns over surging costs for essential inputs such as diesel, fertilisers, and transportation, which are putting immense pressure on already slim profit margins.
The situation has led to calls from industry leaders for supermarkets to “play fair” and support the sector before it faces irreversible damage. Farmers argue that current measures taken by major retailers are insufficient to address the challenges they face, and without significant intervention, the viability of the entire industry could be at risk.
Supermarkets Take Some Steps, But Not Enough
Woolworths has taken a small step by announcing an increase of 10 cents per litre for farmers linked to its Farmers Own Brand. This move is expected to benefit around 20 farmers. Meanwhile, Lactalis, Australia’s largest dairy company, will offer an additional five cents per litre to more than 800 farmers starting in May.
Despite these efforts, Australian Dairy Farmers president Ben Bennett argues that these actions do not go far enough. He criticises the supermarkets for what he describes as a “sanctimonious” approach, pointing out that only a small fraction of farmers are receiving any additional support while the rest are left to manage the rising costs alone.
“We need the supermarket,” Mr. Bennett said, but added that a 20 per cent permanent increase in milk prices is necessary to sustain the industry. “It’s going to have to be a reasonably significant hit at the counter.”
If this increase were to take effect, the price of home brand milk could rise from $1.65 to nearly $2 per litre. This would also have ripple effects across the broader dairy economy, with products like cheese likely to see similar price increases.
The Broader Economic Pressures
Mr. Bennett highlighted that the dairy industry is already under strain due to a combination of factors. The ongoing conflict between the US and Iran has contributed to soaring oil prices, which have driven up the cost of diesel by 77 per cent since the war began. With diesel prices now well above $3 per litre, farmers are facing one of the highest costs in their supply chain.
In addition to fuel, the price of fertiliser has also skyrocketed, jumping from around $800 to $1,800 per tonne. This has been particularly challenging for dairy farmers, who rely heavily on seasonal inputs to maintain their herds.
“Farming is seasonal. This time of year we put a lot of inputs into our farms,” Mr. Bennett explained. “We used to regenerate about 20 to 25 per cent of our herds per annum.”
However, with the financial strain, many farmers may be forced to cull more cows than usual. While selling surplus cattle can provide quick relief, Mr. Bennett warns that this short-term gain could have long-term consequences for milk production.
A Call for Long-Term Solutions
Mr. Bennett acknowledged that farmers are cautious and prefer to plan ahead, but the current economic pressures are forcing difficult decisions. “We have a complicated farming system and we simply have to look after our girls. Sadly, if we haven’t got enough funds coming in, we have to look after fewer cows.”
He also pointed out that the industry was already in decline before the recent conflicts, and the rising costs are compounding existing challenges. While the federal government has taken some steps, such as cutting the fuel excise tax, the impact has been limited given the scale of the price increases.
As the situation continues to evolve, the dairy industry remains at a crossroads. Without sustained support from both the government and the retail sector, farmers warn that the long-term health of Australia’s dairy industry is in jeopardy.
