The truth about cheap milk: ‘Why should I pay more for my milk?’

Milk may be cheap but its low price certainly comes at a cost for many dairy farmers. Here’s the truth on how cheap milk affects the livelihoods of its producers.

Everyone loves a good bargain, especially if it grants you the ability of buying life’s daily essentials at a basement rate.

But cheap milk, charged at around $1.10 a litre, doesn’t come without its costs to a dairy farmer’s livelihood.

In new season of SBS series Struggle Street, viewers meet drought-stricken dairy farmers Barry and Rosey from Deniliquin, NSW who are torn over the future of their business. “Dairy farming is probably pretty stressful anytime but certainly when you have drought, it’s definitely more stressful,” Barry says on Struggle Street season three.

“If the [milk processing company] pays a good price, it means hopefully you can make some money. If it’s not a good price, you know it will just be another struggle. You really need 55c a litre to be able to make some money.”

When viewers first meet the couple, they’re earning just 40 cents a litre. Barry and Rosey’s experience is not a unique one.

Paul Condon of Sea Breeze Holsteins on the NSW south coast is a fifth generation dairy farmer who has been dairying for almost 30 years. In that time, the 53-year-old has never seen the price of milk be so low or the dairy industry encounter such a long-term battle.

“We have more challenges now than ever,” says Condon. “The prices we receive for milk today haven’t changed that much from what we got 15-20 years ago.

We are in a bit of the crossroads about how we go into the future

“Cheap milk degrades the product you work for. So, in a way, when milk is devalued, it devalues your worth as a dairy farmer.”

Condon’s farm is only small, with about 100 cows that produce 2,000 litres of milk a day.

“At the moment, we’re getting about 52-53 cents a litre for milk,” he says.

“From that, you have you take out your total feed costs of about 28 cents a litre and then deduct other variable costs. That brings the gross margin that we get to 20-25 cents a litre. [Many farmers use] that 20c to pay off debt.”

Condon acknowledges that dairy farmers nationwide got a price increase this year when Australia’s two major supermarkets, Woolworths and Coles, lifted the cost of milk by 10 cents a litre. But, the Gerroa farmer says he’d like to receive 55-70 cents a litre to make a decent wage and balance out the increasing costs of living, running a business and coping with seasonal changes on the land.

“Seasonal change has affected our feed source – hay and grain. We have to pay top dollar to feed our cows. Hay costs about $400-500 a tonne.”

An increased profit margin could also mean that his family could afford to hire an extra staff member. Right now, only Condon and his 80-year-old father work on the farm. “If anyone gets crook, then you have to carry the load. It’s not easy.

An increased profit margin could also mean that his family could afford to hire an extra staff member

“We are in a bit of the crossroads about how we go into the future: whether we employ someone to help on the farm or consider how much longer the farm will continue for.”

Condon is not alone in questioning his dairying future. Throughout parts of southern Australia hit by drought, one quarter of dairy farmers are thinking about quitting.

On Struggle Street, Barry and Rosey are soon forced to make a decision: do they sell some of their cows or sell the whole farm? “To me, they’re just a cow that I milk,” Rosey says on the show. “To [Barry], it’s his life I guess. And [by asking somebody to sell their farm], you’re asking somebody to give up their life.”

A change of location

Earlier this year, dairy farmer Darryl Hoey was faced with a similar dilemma over the viability of his farm in Katunga, north Victoria.

But rather than quit dairying altogether, Hoey packed up shop and moved his entire farming operation to Wonthaggi in South Gippsland in May.

“At the end of the day, I made the move because of water politics, water price and climate change,” Hoey tells SBS. “All of these things led to an increase in the costs of production and I felt it would make it difficult for the business to survive [in Katunga] moving forward.”

In Gippsland, Hoey says, the seasons are a bit kinder and rainfall is more consistent than further north. “Hopefully, we will be on a positive ledger this year and be able to move forward.”

Of course, not every dairy farmer facing drought and the brunt of seasonal change will be able to up and move. So Hoey hopes that one day consumers, governments and supermarkets will realise the true value of dairy farming, and raise the cost of milk.

“People can’t keep on having cheap food – whether it’s milk or bread or vegetables – and expect the quality to be high and for farmers to maintain the high environmental and ethical standards that people want. It all comes at a price. There will come a point in time where a line needs to be drawn in the sand.”

Season 3 of Struggle Street premieres Wednesday 9 October at 8.30pm on SBS. The four-part documentary series continues weekly on Wednesdays. Episodes will stream at SBS On Demand after broadcast.

These videos were produced in partnership with SBS and the University of Sydney’s Matilda Centre for Research in Mental Health and Substance Use, Social Policy Research Centre, and Charles Sturt University.