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

Dairy's watershed year

Dec 07, 2018

It has been a big year for the dairy industry and ADF – sometimes difficult, but often rewarding. I want to reflect, in the final Dairy Insights for the year, on some of the significant moments from the past year.

The industry lost Murray Goulburn, which for nearly 70 years has been a bedrock of the Australian dairy industry – our biggest farmer co-op and our largest dairy processor.

The sale of Murray Goulburn to Canadian dairy company Saputo has no doubt changed the dairy landscape forever and the industry is still coming to terms with this event.

ADF led an industry discussion on the code of practice. Working under the auspices of the ADIC, we reviewed the voluntary code of practice and, through consultations with our state dairy farmer members, developed draft clauses to be incorporated into a new code of practice being implemented by the federal Government.

The Government is now using the ADIC work as a foundation to engage farmers in consultations around what they want in a mandatory code of practice.

We called for a change to the federal Government’s skilled worker visa system. We told the Government that the job of dairy farmer needs to be upgraded from an unskilled occupation to skilled. Not only that, but we argued that the visa systems should provide skilled workers with access to longer visa period and a pathway for permanent residency.

This is important because the industry is losing too much money – up to $364 million per year – due to labour shortages. The dairy industry employs more than 40,000, but we will continue to suffer if we can’t gain access to skilled labour.

This year we pushed for the Murray-Darling Basin Plan to include a socio-economic test that is fair for all farmers. Dairy communities cannot tolerate any further job losses or having to pay for increased temporary water costs due to less water being available. We advocated for a test that will deliver neutral or positive benefits for Basin communities.

We have also maintained an active policy focus on key areas such as animal welfare, trade and market access, biosecurity, and social licence.

But despite the achievements of this year, there is still much work to be done. This has been a watershed year for the dairy industry. I also want to highlight some of our priorities going forward.

Collaboration is vital between ADF, the state dairy farmer organisations, our industry services body Dairy Australia, and indeed across whole dairy value network.

With the departure of our major co-operative the role of industry leadership falls fairly and squarely with farmers through their representative and service bodies.

There is no institution to provide weight to the farmers voice. That will only come with farmers speaking as one.

We are not in competition with one another at the farmgate, and there can be no reason to depart from the original purpose of ADF “to promote the interests of the dairy farmers of the Commonwealth in all matters affecting them.”

To do this requires we engage in the painstaking work of building consensus. There will always be gaps and ambiguities, but is our greatest advantage in acting alone or together in the long-term interest of the industry?

We also need to seriously consider greater investment in leadership opportunities. We must have open and honest discussions about the future of dairy advocacy.

Farmers should have greater ownership over the achievements and opportunities in the industry, and we need to develop opportunities to engage the next generation and harness their passion for the dairy industry.

Looking ahead, it is important to keep in mind that while we are an industry that has been under intense pressure, we are also an industry that has the know-how and resilience to overcome adversity and thrive in the long term.

- Terry Richardson, ADF President

Drought policy priority

Nov 02, 2018

This season on my farm we are paying $470 a tonne for grain. Last year we paid around $280/t but that’s a sign of how tough things are, and how the current drought is affecting all farmers. Others I know are doing it tougher.

Prime Minister Scott Morrison has toured drought-affected regions and convened a summit to talk tactics on getting through the current drought and preparing for the future.

Any opportunity to make drought preparedness a government priority cannot be squandered. We urgently need an agreement between commonwealth and state governments to provide a national approach to drought preparation, response and recovery.

Unfortunately, there isn’t much chance of this drought lifting, despite recent rainfall acros some parts of the country. Australia just experienced the driest September on record and the Bureau of Meteorology is predicting a 70 per cent chance we will soon be hit with an El Nino event.

Fodder remains scarce and water prices have continued to surge. Farmers are now looking to secure new season hay for their livestock, which has pushed up demand. The result is near record price hikes.

Worryingly, prices will most likely rise further as demand for feed continues to come from across the country, outstripping supply. This means that securing long-term supplies of new season hay could be an issue.

Some farmers are resorting to alternative feeds such as sorghum stubble and cane tops. But with crops like canola being cut for hay and silage, farmers should be cautious and get feed tests.

Water prices are also a point of concern. Both northern Victoria and Murray water prices are at record highs. In northern Victoria, prices have skyrocketed by 202 per cent since last year despite less water being traded, down 53,770 megalitres (ML). The average price reached $321/ML in September, the highest since 2009. Demand continues to grow as tight supply is driving the price up.

The Murray irrigation area has a similar position – the average price recorded in September was $351/ML, up 179 per cent from the same time last year, despite the amount of water being traded decreasing by 22 per cent. The current price trend is being driven by lack of rain and reduced inflows. Our main concern is that if all weather forecasts prevail, there will be no respite from the high prices.

There has been little rainfall and drought conditions have only intensified. Unfortunately, this appears set to continue with the Bureau of Meteorology now indicating eastern Australia will likely remain dry.

Queensland, Tasmania, Victoria, eastern South Australia and southern New South Wales are all expected to have below average rainfall, while Western Australia has about an equal chance of exceeding the median rainfall. The above average temperatures are likely to remain to at least the end of 2018. These conditions will continue to pose challenges to producers currently affected by drought.

I would encourage farmers to use the different drought assistance packages being offered by state and federal governments. Information about all these initiatives is available on the relevant government websites.

Dairy Australia is also a valuable resource for information and advice on managing drought preparedness. The latest Situation and Outlook report is out this week and paints a more complete picture of seasonal conditions and critical factors for farm performance.

Many are calling this the worst drought in living memory. We’re all praying for rain, but with no end to the drought in sight, we must be realistic about our options and talk seriously about safeguarding against future droughts.

Dairy farmers aren’t just part of a broad industry; we are a community. Don’t be afraid to seek advice, talk with others and be aware of others who may need support.

- Terry Richardson, ADF President

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