Australian dairy farmers have reason to rejoice.
The future of the milk trade looks brighter.
Recently, a key first step was taken to ensure monthly milk price transparency and competition, as the Australian Milk Price Initiative (AMPI) ran its first regional milk markets.
The trading was carried out on the Mercari platform, owned and operated by the Financial and Energy Exchange.
These regional spot markets provide the monthly price transparency needed to enable a financial futures hedging market like those seen in New Zealand, the United States and Europe.
These financial markets already allow dairy producers and processors to lock in prices up to three years in advance for some of their milk.
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As the national representative body of dairy farmers, Australian Dairy Farmers (ADF) has championed and sponsored AMPI and encourages dairy farmers to take advantage of the trade platform.
Not only will AMPI hold dairy farmers accountable when they sell milk, but it will also increase transparency and build trust.
As said at the launch, “there is no price signal more transparent than an open market price!”.
The benefits for the dairy industry don’t stop there.
AMPI will improve risk management throughout the supply chain with matched pricing from customer to processor to farmer, providing the ability to lock in margins throughout the chain.
Better margin and risk management enables better planning, which in turn drives investment and growth throughout the supply chain.
More investment means a strong dairy industry.
Among the concerns that emerged from industry consultations during the development of Australia’s dairy plan was a call for “further measures to increase transparency and help manage market risks, including the establishment of a functioning milk price market and new risk measures supported by government legislation”. .
This is something the ADF has helped to achieve.
At ADF, we have worked closely with government and industry to develop AMPI.
Similar trading platforms are already working for other agricultural sectors, including wool and grains.
Through consultation with industry bodies and the dairy community, and with a grant from the Federal Government, the new business platform will enable Australian dairy farmers to capitalize on their competitive advantage.
In 2019, a $560,000 pledge for the development of a milk exchange platform was one of the biggest campaign promises the dairy industry received from the Morrison government.
While the launch of AMPI is an important step in the right direction, the work is not yet done.
Seed funding is required for the governance and operating model of AMPI, as well as for the education of participants.
We believe that these funds can come from the Grant Program for Improving Market Transparency in the Perishable Agricultural Commodity Industries.
This program will run for three years from 2022-23 to 2024-25.
A total of $5 million in grants is available.
Ongoing investment and innovation are essential for the future of the dairy industry.
With an open market where farmers can choose who to sell their milk to, at what price and under what conditions, the future looks brighter.
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