FAQs

A. The Milk Value Portal (MVP) is a well-established credible source of primary information that
can help farmers understand how milk is valued in each 12-month production season, and the
domestic and global market factors and on-farm parameters that can influence this.

It helps answer the question “What is the milk price?”, and “what influences the milk price?”.
Primary data is provided directly from the buyers of raw milk themselves, dairy processors, and
aggregated by an independent third party, representing more than 90% of the milk volumes
across Australia, and eight of the nine production regions.

The MVP is an initiative of the Australian Dairy Products Federation and delivers to Commitment
5 of the Australian Dairy Plan, which aims to “restore trust and transparency between farmers
and processors to strengthen industry confidence”.

A. The raw milk market is highly complex and rapidly evolving as it responds to domestic and
global factors which all influence farmgate milk prices.

Currently, more than 80 per cent of Australia’s milk is produced in the Southern manufacturing
regions of Victoria, South Australia, southern New South Wales, and Tasmania. The milk prices
paid by these manufacturers are highly influenced by global markets, with a small portion only
used in local fresh milk products. More than 80% of this milk pool is exposed to import and export
competition and hence influenced by the volatility of the commodity markets (fat and protein) and
the exchange rates. Milk values are also influenced by the extent of competition between
processors and product mix, processing and logistics costs, and available margins in domestic
retail, industrial and food service markets.

In comparison, in the Northern (NSW, QLD) and Western dairy regions, where locally
produced milk services the fresh/drinking milk market, milk pricing has regard for the milk prices
in the Southern milk pool, local supply and demand conditions, the cost of sourcing milk, and
Southern milk price overtime.

Find out more detail on how farmgate prices are determined here.

To keep up to date with the outlook for farmgate milk values and prices, register to receive the
MVP Quarterly Insights reports available here.

A. The Southern region farmgate milk prices paid by processors can be represented as
comprising an underlying commodity milk value (CMV) and a value-add or premium (or in some
periods a discount) that depends on the product and market mix of each processor. This includes
fresh and other retail dairy products as well as higher value specialised dairy ingredients.

While the CMV is an indicator that can be used in planning, the final milk price paid by each
processor will be influenced by their specific product and market mix, as well as the competition
for milk at farmgate.

Learn more about the CMV here.

A. The Farmgate Milk Value Tool (FMVT) is an interactive tool that allows users to get a regional
comparison of average farmgate milk prices, influenced by different farm parameters such as the
size of the farm, seasonality of milk supply and milk components (butterfat and protein content),
for the season and for each quarter, in cents per litre and dollar per kilogram milk solids.

A user can customise a farm situation nearest to their own situation and observe how milk is
being valued – as a weighted average milk price and with high and low values – based on the
minimum prices available for a milk supply agreement, for that example farm. This includes
selecting the farm size (in litres), one of eight production regions, seasonality of supply (flat,
average, seasonal, split), butterfat and protein content (low, average, high), price (cents/litre and
$/kg milk solids), and the year (current and previous years), and seeing how changes to those
farm parameters can affect potential farmgate milk prices over the season. It also provides the
user with reference points to assess relevant contracts that may be available to them.

The FMVT features milk pricing data for the current and previous years, with four years’ worth of
data soon to be made available.

This tool is also supported by domestic and global market insights that can influence milk price
including commodity values and the Commodity Milk Value (an indicator of milk price); exchange
rates and import competition.

Access the Farmgate Milk Value Tool here.

A. The full season weighted average milk price in the Farmgate Milk Value Tool (FMVT) is
calculated based on the minimum monthly pay rates, incentives, and deductions contained in the
terms of each applicable contract for each example farm, across a range of farm parameters
(location, farm size, milk solid yields, seasonality of production).

For each example farm, the resulting calculated prices are then weighted, to calculate an
average for the region based on the estimated milk collections by participating milk buyers or
processors.

The ‘range’ of milk prices featured in the FMVT reflect the weighted average as well as the
highest and lowest milk prices that would be paid based on the relevant processor contracts on
the selected farm parameters.

To learn more, visit the Farmgate Milk Value Tool here

A. The Farmgate Milk Value Tool is not designed to be a click and compare. It will not show the
individual prices available from processors, nor will it give you a specific milk price offer – those
still need to come directly from your processor.

A. All processors, regardless of the end use of the milk collected, pay for milk based on their fat
and protein composition.

There are two common comparison measures used to simplify the benchmarking of the net milk
prices achieved – dollars per kilogram milk solids (net income per the total kgs of fat and protein
supplied) or cents per litre (net income per the total litres of milk supplied).

The two measures are obviously related based on the composition of milk.

As a guide and based on an average milk solid per litre of Australian milk of content of
7.60grams of milk solids (or 7.6%: 4.15grams of fat or 4.15% and 3.45grams of protein or
3.45%), a way to convert a “cents per litre’ price to “$/kg of milk solids’ price, is to divide the
cents value by 0.076, or to convert the $/kg milk solids to cents/ litre multiply by 0.076.

A. Under the Australian Competition and Consumer Commission (ACCC) Dairy Code of
Conduct, processors can only purchase milk under a Milk Supply Agreement (MSA) that
complies with the Code.

Milk Supply Agreements between farmers and processors contain a series of terms and
conditions that must be met to regulate their dealings with one another.

Processors who want to purchase milk during the next financial year must publish their MSA on
their website by 2pm June 1, of each year. This includes outlining what the minimum opening
price will be so that farmers can better plan for the season ahead.

You can find links to the dairy manufacturers MSA on the MVP website here.

The ACCC has published a series of guidance documents to help implement the requirements of
the Dairy Code, including a new processor checklist.

A. Under the ACCC Dairy Code of Conduct, minimum milk prices and Code-compliant Milk
Supply Agreements (MSAs) must be published by 2pm June 1, each year.

Those opening announcements may be revised prior to the start of the season (1 July), as clearly
evident by the results seen due to the competition for milk.

A. Step-ups are a milk payment increase, usually announced once the season is well underway
and typically paid as a full season uplift in base milk pay rates.

The number of step-ups announced is at the discretion of individual processors.