Milk price cut to farmers

South Australia's dairy industry is hoping the global financial crisis will ease this year to help boost the price of milk.

Warrnambool Cheese and Butter is offering farmers 28 cents a litre for milk this season, despite farmers saying production costs are around 30 cents per litre.

Earlier, Warrnambool's competitor, Murray-Goulburn, announced that it would be cutting its milk price to 26 cents per litre, a move the company's chairman says will probably force some farmers out of the industry.

Ken Lyons from the South Australian Dairy Farmers Association says the global downturn has meant that countries do not have the money for dairy products.

He says if the situation improves, then the price of milk will rise to more sustainable levels.

"The market has bottomed and there are some signs of some recovery over the next 12 months, so if that was to eventuate then these opening prices would build into something that actually took the milk prices forward in the coming year," he said.

Mr Lyons says the lower price will squeeze some farmers who are also struggling with dry conditions.

"Those farmers that are exposed to these export markets will be thinking about their future," he said.

"Also our farmers that are related to the low water allocations associated with the Murray-Darling Basin are also in an area where there is some sort of uncertainty."

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Fri 3rd July 2009 - 01:57pm