Explaining the Dairy Levy Poll

Jan 24, 2017

 

Today, it was announced that there will be no change to the dairy levy.

This decision was made by the Levy Poll Advisory Committee (LPAC), whose core role is to make recommendations regarding the level of farmer levy funding to support the long-term research, development and extension strategy for the dairy industry.

It is important to note, per the ‘Explanatory Statement’, issued by Authority of the Deputy Prime Minister and Minister for Agriculture and Water Resources that the changes may provide Dairy Australia with savings of up to $1 million every five years, which could be re-directed towards research & development, plus marketing and promotion activities for the benefit of the dairy industry, including dairy farmers.

Given the announcement of the LPAC decision, there will likely be some opposition to the recommendations. Therefore, it is important that there is a good understanding of the process which formed the LPAC and what could happen as a result of the recommendation.

Background

During 2015, there was a levy poll review process undertaken to consider the requirement for Dairy Australia to hold a levy poll every 5 years.

That process led to a recommendation to levy payers to change the regulations and form the LPAC, which would undertake a review of levy funded activities and make recommendations to industry on whether a levy poll to change the levy rate was required.

Levy payers voted in late 2015 to accept the proposed changes to the levy setting process. New regulations to give effect to the changes were signed by the Deputy Prime Minister and Minister for Agriculture and Water Resources, Barnaby Joyce in late December 2016.

The LPAC was convened several times in the second half of 2016 to consider whether a levy poll should proceed in 2017 as was required under the previous regulations. These LPAC meetings were based on draft regulations which were expected to be signed off late in 2016.

Australian Dairy Farmers and Dairy Australia, under the new regulations process, were required to provide the LPAC with a joint paper and recommendation on what should happen with the levy rate. The joint recommendation was for no change in the levy rate.

The major piece of information available to inform farmers will be the LPAC report which gives an outline of the work it did, what information it used in arriving at its recommendation(s), who it consulted with, its assessment of the value of the DA levy, etc.

Set up and composition of the LPAC

The six initial members of the LPAC were nominated by Australian Dairy Farmers, Dairy Australia and the Australian Dairy Products Federation. The initial members formed a selection panel that proceeded to select up to nine milk producer levy payer representatives who applied to become members of the Committee. All levy payers were invited to apply for one of the nine levy payer positions.

All the details around this are on the Levy Poll Advisory Committee web site – www.dairylevypolladvisorycommittee.com.au

What happens next?

As required by the new regulation requirements, the Chair of the LPAC - John Lawrenson, is required to advise Dairy Australia’s Chair and Minister Joyce, of the decision of the Committee. This happened this week, along with the media statement issued by the LPAC.

Dairy Australia has 14 days from receipt of the decision of the LPAC to advise all levy payers of the outcome.

Any levy payers wishing to oppose the LPAC recommendation and propose an alternative option can initiate a petition.

Levy payers who are Group A members of Dairy Australia and who together represent 15 per cent of total levies paid in the previous financial year, will have 75 days to lodge a petition with Dairy Australia, requesting a levy poll to be held and specifying their proposed levy option.

If there are one or more petitions which each represent at least 15 per cent of the total levies paid, then Dairy Australia will be required to hold an Extraordinary General Meeting (EGM) at which Group A members of Dairy Australia will have the opportunity to vote to either proceed or not proceed with a levy poll.

If the resolution to hold a levy poll is passed at the EGM, Dairy Australia must present the petition and the results of the vote to the LPAC within 14 business days after the resolution is passed.

The LPAC must also request Dairy Australia arrange a levy poll as soon as reasonably practicable and must set out the levy options proposed by the petition and may set out any other levy options which LPAC proposes. LPAC has an ongoing role in the conduct of a levy poll including, but not limited to, information to be provided to levy payers to use in determining their voting intention.

In the event of no petitions which represent 15 per cent of total levies paid within the 75-day period, the levy rate remains unchanged and there will be no Levy Poll.

What could happen

During the last levy poll, there was a reasonable percentage of farmers who voted for a zero levy, so it is not unreasonable to expect there will be one or more groups who will organize a petition to have a levy poll with a levy rate less than currently applies, or set to zero.

To guarantee the fair and democratic rights of all levy payers who are the Group A members of Dairy Australia, ADF believes it was important that provision was made in the new regulations to ensure there was a process to allow different views among farmers to be considered.

Whether a petition reaches the full 15 per cent threshold to trigger a EGM of Dairy Australia Group A members will be the issue.

If there is a need for an EGM because of one or more petitions to Dairy Australia, then ADF will need to be clear about why it recommended, jointly with Dairy Australia, that the levy rate should remain unchanged.

This will be a process ADF must manage during the leadup to a required EGM of Dairy Australia but may also need to be engaged in the debate during the 75 days in which a petition can be presented.

To read the explanatory statement of the Legislation, visit https://www.legislation.gov.au

For further information regarding the Dairy Levy Poll process review, visit www.dairylevypollreview.com.au


John McQueen

Interim ADF Chief Executive Officer


 

June President's Message

Jun 30, 2016

Opening milk price announcements made this week by Murray Goulburn and Fonterra have once again, reinforced the need for improved transparency in the way milk pricing is structured and communicated in Australia.

Not only are the announcements much too late for farmers to properly budget and plan around, but many questions have to be asked to understand them. Add to the already complex system a loan repayment and the forecast opening price is far from what it first appears.

Both Murray Goulburn and Fonterra’s recent announcements are confusing and difficult to understand – they lack clarity and transparency.

Murray Goulburn’s repayment system is complex at best. Further, the exact amount that farmers will repay by the end of the financial year 2016-17 is not articulated in the announcement – nor is it clear that farmers will actually pay an initial repayment of 14 cents per kg/ms plus any further repayments Murray Goulburn decide to deduct.
 
Fonterra’s announced opening price of $4.75kg/ms was better than expected, however the detail around who received what is not clear. Existing Fonterra suppliers will receive around $4.75 ($4.73 due to interest on the loans). Any supplier who did not supply Fonterra milk in May-June (including farmers that had dried off) are not eligible for the Autumn offset and therefore receive around $4.54.  
 
We shouldn’t have to ask to get this information – it should be clear as day. After all farmers are providing the very lifeblood of these organisations, it’s in everyone’s best interests that we get this information up front and can work within these means. 

Improving the transparency of the milk pricing system is important, and Australian Dairy Farmers (ADF) continues to work with our state members to this end. It is essential that processors come to the table and discuss this as a collective, to help protect the future of our sector.

No one can dispute that the current market situation for dairy farmers, whether you are a supplier to the export or domestic market, is rough. Even the best placed businesses will be making difficult decisions.

While we cannot change the milk price, ADF is working hard with our state members to improve the transparency in the milk pricing system and simplify milk contracts. We are also fighting for farmers to better manage the risk throughout the supply chain so that they do not always bear the financial risk.

This weekend Australia takes to the polls and by next week the successful party will be moving into Parliament. ADF and our state members will be back in Canberra as soon as the elected party is announced to keep the pressure on.

As an industry dairy has supported its own and will continue to do so. We’ve never asked for a bail out but rather for targeted assistance that will help get our industry over the current hurdle and better balance risk throughout the supply chain going forward. We need structural change that improves fairness and brings more balance into the market – competition law can be improved more.

ADF acknowledges the Dairy Recovery Concessional Loans are now available in SA, TAS and Victoria. We welcome this support, and will continue to advocate that all affected dairy workers are eligible for this assistance. 

I encourage all farmers to keep talking to ADF, your state representatives and RDPs. It’s tough for everyone out there right now, and the season ahead will be challenging. This will go beyond the farm gate, with our service providers and communities likely to feel the pinch too – keep this in mind and let’s all look out for one another.

David Basham 

Acting ADF President

What does passing of Dairy Levy Poll Bill mean for levy payers?

Mar 21, 2016

The Dairy Levy Poll process is set to be streamlined following the passing of legislation in March 2016 to alter review procedures while retaining a strong democratic process for farmers.

The passage of the Bill provides certainty around the process for the 2017 levy review process and future reviews. Australian Dairy Farmers (ADF) has welcomed the passage of the Bill, re-emphasising that this is not about removing Dairy Australia from scrutiny, but instead about streamlining the process and making sure every levy dollar invested delivers value back to farmers.

ADF thanked the Minister for Agriculture and Water Resources, the Hon. Barnaby Joyce and the Department of Agriculture for championing the Bill on behalf of dairy farmers, who voted to make the changes to the process in November 2015.

The changes mean that instead of a mandatory poll, every five years, an industry advisory committee will review whether there is a need to change the levy or conduct a poll. If no change in the levy is recommended, there will not be a poll. However, a poll must be held if it is recommended there be a change in the levy.

The changes also provide a mechanism to allow dairy farmers to request a poll with the support of at least 15 per cent of levy votes.

Now that the legislation is passed ADF will oversee the development of more in-depth procedures for the revised process.

For further information regarding the Dairy Levy Poll process review, visit www.dairylevypollreview.com.au

Levy poll changes get the go-ahead

Feb 29, 2016

The Minister for Agriculture and Water Resources, the Hon. Barnaby Joyce, has supported changes to the dairy industry levy poll process, voted on by levy payers in 2015.

The Bill to amend the current Act was introduced to the lower house on 11 February 2016, and debated on 25 February 2016. Debate in the Senate commenced on 29 February and ADF currently awaits a final decision on the Bill.

“Australia’s dairy sector is an important and forward-looking industry, with good leadership and a strong vision for its future,” Minister Joyce said.

“Levy payers have demonstrated strong support for these changes, which will simplify and streamline the dairy levy process.”

Mrs Jolliffe said the changes are expected to result in a simpler, less costly levy poll process, while still ensuring accountability in spending levy funds is retained.

“This means these levy funds can be directed towards vital research, development and extension programs, increasing productivity and profitability and continuing to strengthen innovation within our industry.”

For more information on the levy poll changes please see www.dairylevypollreview.com.au.


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