News Price risks
Australian fancier gains access to spot market
Australian dairy farmers in the state of Victoria have been able to sell their milk on the spot market for two weeks now. The intent of the initiative is to increase market transparency and mitigate price risks. The milk price can also be fixed on the platform for a longer period.
On the online spot market (which runs on the Mercari platform), milk suppliers and buyers find each other on an open platform. Dairy farmers in Victoria, the second largest dairy state, are thus given the opportunity to offer the milk to multiple processors, while buyers in turn benefit from multiple suppliers. The platform, which is open twice a month, also connects processors and end users. This gives every link in the chain the opportunity to monitor their margins – through so-called back-to-back transactions.
David Littleproud, the Australian Minister of Agriculture, says that this will give dairy farmers a stronger competitive position in the chain. The platform was one of the spearheads of the incumbent Australian government to make dairy farming in the area more resilient in the chain. Moreover, the public market leads to more transparency, which, according to the minister, benefits food chains.
Up to 13 months ahead
Meanwhile, the first trading on the platform has been made for prices above AUD 9,60 per kilo of milk solids for delivery in May. By Dutch standards that is well over forty. For January 2023 delivery, 100.000 liters have been traded for $8,50, while trades have already been made for March 2023. The supply contracts advance from two to a maximum of thirteen months, enabling the entire chain to cover price risks over a longer period of time.
Wouter Job
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