NSW Farmers is urging dairy processors to consider the impact of successive years of tough conditions for dairy farmers when announcing new milk supply contracts in coming weeks.
NSW Farmers Dairy Committee Chair, Cowra's Colin Thompson says long periods of low rainfall, bushfires and almost a decade of unrealistically discounted milk prices have taken a toll on dairy farmers.
"Around 50 dairy farmers exited the industry in NSW alone last year, while almost 500 left nationally. Price drops would invariably cause further exodus from the industry, many farmers would not cope mentally or financially," Mr Thompson said.
"Processors should only have two options when developing new supply contracts - to increase farmgate milk prices or at a minimum to maintain current prices.
"A price drop from processors would be devastating at the moment. Paddocks are looking greener right now, but that doesn't mean the drought has broken. This drought has been one of the most severe we've seen, so recovery will take a long time.
"Grain is still at record high prices, and other input costs are high. Dams are still at low levels, with Burrendong, Wyangala and Chaffey all at or below 20 per cent."
Mr Thompson says the pricing behaviours of both processors and supermarkets have threatened the sustainability of the dairy industry.
"Supermarkets continue to retail their milk at irresponsibly low prices. We need a minimum of $1.50 a litre for milk and $9.00 per kilogram for cheese before we see healthier profit margins along the supply chain," he said.
"Processors need to do their bit and ensure profits are passed on to farmers. There needs to be pricing parity in milk pools around the state that reflect the increasing input costs for farmers, and drought support payments should also be continued.
"The dairy industry is at a crucial stage. As a key element in the supply chain, processors need to do their bit to deliver a fair deal for farmers and help protect the industry's future."