ASX-listed Bega Cheese also warning there are more cost pressures to come as rising payments to producers flow through to the prices that customers see at the checkout.

In an update to shareholders on Wednesday evening, Bega said particularly strong competition between producers during June and July have seen the farm gate price of milk spike by 30 per cent for the 2023 financial year compared with 2022.

“The farm gate price increases will benefit farmer suppliers, impact all Australian dairy companies, and is already being reflected in higher product prices in the retail and food service markets,” the company said.

Bega warned investors its 2023 financial results “will be impacted by the delay in timing of some of these higher product prices”.

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President of the Australian Dairy Federation Rick Gladigau said that farmers understood that rising prices were another hit to consumer’s pockets during this period of food inflation, but that dairy goods are still an incredibly affordable food commodity.

“We have seen $1 milk disappear, but it is still technically a very cheap product,” he said.

Wholesale milk prices are calculated based on the quantity of milk solids per kilogram of product. Prices have spiked over the past two months due to a range of factors, including a shortage of milk supply which means there is more competition both here and overseas for Australian-made products.

Gladigau said farmers have been facing tough conditions for years and that a jump in farmgate milk prices could help those that are still in the industry invest back in their farms.

“If we weren’t seeing [this] better farmgate price, we would see farmers exit the industry,” he said.

The major supermarkets have been focused on keeping the price of home brand goods down as inflation and rising interest rates put pressure on shoppers.

Woolworths recently promised a price freeze on a range of own-brand pantry staples, while Coles has been promoting a range of groceries with price tags of less than $1. These deals have largely excluded dairy products and fresh produce, however.

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