Battles on many fronts

Apr 05, 2019


The dairy industry is in the fight of our lives on a number of fronts. While the drought continues, fodder and water are trading at record or near-record prices.

 
For irrigators in northern Victoria, where the average price for water was recorded in February at $499 per megalitre, this is nothing short of a catastrophe. That’s a $79/ML increase since the month before and 420 per cent higher than it was a year ago.
 
The current situation is untenable and must be addressed before we lose more farmers.
 
On a broader scale, I was in Canberra in March for the start of third round negotiations between Australia and the European Union over a new free trade agreement.
 
The EU is continuing to drive a hard bargain by pushing for the inclusion of geographical indications (GIs) in the agreement, banning Australian dairy manufacturers from using product names which have a connection with EU countries, such as Parmesan and Fetta.
 
If the federal government caves to this demand, the dairy industry faces losing 22,000 tonnes of cheese varieties with an annual value of production worth more than $180 million and export sales averaging more than $55 million.
 
Even more worryingly, if Brussels succeeds in forcing us to extend GIs to capture packaging that evokes EU regions, a further 45,000 tonnes of local cheese production will be affected, averaging $300 million in domestic and export sales per year.
 
This is truly alarming for our industry, which is still the third largest agricultural industry in Australia.
 
And if we are serious about growing the Australian dairy industry, we must also work constructively to solve the industry’s skilled labour shortage.
 
After scrapping the sub-class 457 visa last year and replacing it with a Temporary Skills Shortage (TSS) visa, which blocked a pathway to permanent residency for skilled migrants looking for work on dairy farms, the federal government has now brought us a step closer to securing a permanent skilled workforce.
 
Under changes to the Australian Skilled Occupation List, high-level dairy farm managers who have responsibility for overseeing farming operations are eligible for TSS visa entry to Australia for up to four years with the possibility of renewal and permanent residency via the 187 visa.
 
The pathway to permanent residency is vital to ensuring Australian dairy farmers can attract skilled overseas workers who will avoid Australia if they can obtain permanent residency in other countries.
 
This outcome is good news for farm owners. The experience of regional communities around Australia is that migrant farmers not only fill labour shortages, but they also bring with them new technological insights gained overseas to apply to Australian farming and revitalise local communities.
 
The industry has also achieved a victory in breaking the back of the despicable discount milk marketing ploy that has dogged us for eight long years.
 
Woolworths, Coles, ALDI and Costco have all raised the price of their cheap milk by 10 cents, with the increase going back to farmers. IGA is slowly following.
 
There is no denying that this is a great outcome, but while some producers have gained substantially from this initiative, most farmers won’t receive much benefit.
 
It at least sets the stage for a larger conversation around the value of the entire dairy cabinet, but it is vital that all dairy farmers receive a fairer return for their hard work.
 
But while we speak about the industry, we must remember that it begins each day with people on more than 5500 individual farms sending milk off to be processed.
 
Every dairy farm relies on the commitment, enthusiasm, and hard work of these people for success.
 
However, I know from my own experience that dairy farming can be tough, and sometimes you have to reach deep for the commitment to get to the day’s end.
 
The nights can then be long, wondering what the next day will bring.
 
But I also know from experience that it is important to never think you are alone when there is uncertainty.
 
I count myself fortunate that I reached out, shared problems and talked issues through. I encourage anyone who finds themselves in a tough spot to do the same.
 
Even more important is for each of us to open the conversation with someone who might be in that position.

- Terry Richardson, ADF President

 

Checkout milk price key factor

Mar 08, 2019

The dairy industry has been crippled by the debilitating effects of $1-a-litre milk for more than eight years.

But now Woolworths has raised the price of its $1 per litre milk to $1.10, with the extra 10 cents to go, in full, directly back to farmers, there is for the first time hope that we can beat this destructive pricing strategy.

This is a major victory and Woolworths should be congratulated for making the difficult, but right decision to ensure farmers get a fairer return for their tireless work.

However, while we may regard this as a step in the right direction, it is certainly not the end of the battle against discount dairy.

Other supermarkets have so far refused to follow Woolworths’ lead. Coles has proposed a government mandated industry-wide levy, while Aldi has so far rejected all calls to raise the price of its discount milk line, which retails for 99 cents-a-litre.

This sends a negative message to our farmers about the worth of their work and their product – especially when the major retailers have just raised the price of bread due to high grain prices.

Coles, without a mechanism to ensure an increase in the discount milk price would go directly to farmers, has instead offered to collect donations at their checkouts.

This suggestion is just another slap to their suppliers. Any suggestion by Coles that they can rattle the collection tin for struggling farmers shows how out of touch they are. Farmers don’t want a handout. They run businesses and like all business owners, farmers want a fair price for their product.

Farmers are currently suffering through a severe drought, with production costs skyrocketing due to high grain, hay and water prices.

Supermarkets cannot continue selling cheap milk while simultaneously raising the price of other products to help drought-stricken farmers.

The last Dairy Australia National Dairy Farmer Survey, conducted in 2018, found farmer confidence in the future of the dairy industry has dropped from 75 to 47 per cent over the past four years.

Removing $1 milk will help restore farmers’ financial confidence, and also boost confidence in regional communities and small businesses.

Farming families put tireless effort and resources into producing a quality product, day in and day out, and to see it devalued to the consumer has a deep and lasting impact.

Most shoppers are aware of how difficult the past few years have been for the dairy industry. We have been heartened by the outpouring of support from all Australians, wanting to know which brands they can buy to support farmers.

The latest Dairy Australia Situation and Outlook report attributed a trend of declining farm profitability to soaring productions costs combined with relatively steady milk prices.

Dairy Australia is forecasting national milk production in 2018/19 will fall below 9 billion litres for the first time since the mid-1990s, in another blow to industry confidence.

It is clear something must change to reverse this trend of decline, and the retailers have an opportunity to come to the table and help us implement a solution.

If more farmers leave because their milk price doesn’t reflect their high production costs, there will be a real danger of Australia soon not having a dairy industry.

- David Inall, Australian Dairy Farmers CEO

Firm trade stand vital

Feb 04, 2019

Australia needs to stand up to the European Union and ensure our local dairy industry doesn’t suffer under a new free trade agreement.

The federal government is clearly enthusiastic about the prospect of securing a $100 billion trade deal.

Prime Minister Scott Morrison went so far as to pledge to “accelerate” negotiations for greater Australian export access into Europe at last year’s G20 leaders’ summit.

But as part of the negotiations, that started in mid-2018, the EU is pushing for Australia to accept and implement strict labelling rules that could spell disaster for our dairy industry.

Called geographical indications (GIs), the stated purpose of these rules is to “protect distinctive EU food and drink products from imitations in Australia”, but in practice imposing such restrictions poses a grave threat to existing locally produced dairy products.

Such a move could see a ban on locally produced Feta, Parmesan, Haloumi and eventually Greek Yoghurt.

Dairy producers will be forced to change the names of these products and consumers will be confused and frustrated at no longer being able to find some of their favourite dairy products on supermarket shelves.

Not only that, but European negotiators are also arguing to extend the scope of GIs beyond the name of products to include colours, flags, symbols, script or anything that might evoke the source of a product.

A quick look in any supermarket cheese section will show you that many Australian dairy manufacturers have built their brands on their cultural heritage, and now face the possibility of having that taken from them.

This is a nightmare scenario we cannot let play out.

Australia has a prominent dairy sector, worth $4.3 billion at the farm gate alone, and is still the country’s third largest agricultural industry.

We produce over 22,000 tonnes of cheese varieties that are of risk each year, with a value of production equalling more than $180 million per annum and export sales averaging over $55 million.

And alarmingly, the EU wants to reserve the right to add names to the GI list in the future.

Greece is currently applying to have the term ‘Greek Yoghurt’ protected as a GI.

This is just a taste of things to come if Australia allows GIs to be included in a trade deal with the EU.

The dairy industry does not oppose the concept of GIs that are linked to a specific place, but we do have concerns with restricting common food names - for example, the use of Camembert as a common name, in comparison to Camembert de Normandie, which is clearly linked to Normandy in France.

A further 45,000 tonnes of local cheese production, averaging $300 million in domestic and export sales per year, could face future restrictions on production and sale if strict GI evocation rules are applied under the FTA.

It is vital that the free trade agreement has benefits for both sides, considering the ease of access European dairy manufacturers have to the Australian market.

These trade negotiations should allow both Australia and the EU to capitalise on an improved commercial relationship.

But we need to ensure this deal frees up the trade relationship rather than creates technical barriers such as GIs.

The future of the Australian dairy industry depends on the federal government’s courage to stay firm in trade negotiations and push back against the EU’s demand to enforce GI restrictions.

- Terry Richardson, ADF President

Learning from crisis

Jan 07, 2019


When Australia’s largest dairy processor and farmer co-operative Murray Goulburn announced in April 2016 that it was slashing the farmgate milk price in an attempt to claw back $183 million it had already paid to suppliers, the dairy industry was plunged into a deep crisis.

Farmers were rightly outraged that the industry became paralysed by events that were seemingly preventable.

The Australian Competition and Consumer Commission (ACCC) took action against the processor in the Federal Court for making false or misleading representations to farmers that it could maintain its opening milk price of $5.60 a kilogram milk solids and a forecast final milk price of $6.05/kg MS when in fact this was not sustainable.

But while Murray Goulburn admitted to this breach of the Australian Consumer Law, which at the time carried a maximum fine of $1.1 million, the ACCC elected not to pursue a financial penalty because as a farmer co-operative, any penalty would likely end up being paid by the very people who were hurt by the company’s actions in 2016.

Instead, the blame was dumped squarely at the feet of former managing director Gary Helou, who copped a $200,000 fine for being “knowingly concerned” in Murray Goulburn’s false or misleading claims about the farmgate milk price.

He must also pay $50,000 to help cover the ACCC’s legal costs and has been banned for three years from any involvement in the dairy industry.

This outcome should have brought closure to the farmers whose livelihoods were affected by the milk crisis.

But instead, new questions are being raised over the strength of penalties meted out for misleading suppliers and the need for greater information sharing in ensuring robust accountability processes.

Some farmers have reacted angrily to a $200,000 fine which appears to pale in comparison to the $10 million Mr Helou reportedly pocketed during his tenure at the helm of Murray Goulburn – especially when the co-op’s former unitholders have been ordered to pay the ACCC’s remaining legal costs, also amounting to $200,000.

Farmers are valid in their anger, considering the impacts of the milk crisis on their own businesses and the whole industry.

But we must remember that at the time the ACCC intervened, the maximum fine that could be imposed on an individual for this breach of the consumer law was just $220,000.

This has subsequently been increased to $500,000 under new legislation, but the door is open to discuss whether penalties imposed for breaches of the consumer law and Corporations Act are a sufficient deterrent for executive wrongdoing.

We must consider how these penalties improve governance processes, provide accountability and maintain the trust between farmers and their processors that is vital for success.

The Murray Goulburn saga reinforces the need to maintain high standards of corporate governance. Anyone who wants to retain a position on a company’s board of directors must be prepared to be held ultimately accountable.

The dairy industry’s primary goal in the past three years has been to ensure that another governance catastrophe never happens again.

Australian Dairy Farmers, as the peak dairy farmer body, has done its best to bring the industry together behind measures that will help repair relationships across the supply chain.

The Federal Government is now moving closer to implementing a mandatory code of practice for the industry.

There has been intense community interest for the health and well-being of farmers.

It is encouraging to know that Australians who aren’t involved in the dairy industry understand the stresses caused by the events of 2016.

The dairy industry needs closure and we are trying to achieve that outcome.

The recent judgment against Murray Goulburn’s former management is another step towards repairing trust.

The loss of the Murray Goulburn co-op – which for nearly 70 years was the cornerstone of the Australian dairy industry – continues to cast a long shadow over the industry.

We must take seriously the lessons learned from the 2016 milk crisis so that we can genuinely rebuild trust between farmers and processors and repair once strong relationships.

- Terry Richardson, ADF President

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