It is a win win situation

Oct 07, 2016

Collaboration is the key to get us where we need to be. Our industry relies on all the elements to operate effectively. Farmers need processors and vice versa – so the solutions require all of us to come together to ensure a positive future. It is a win win situation.

It is one thing to constantly pick apart the industry to highlight the problems, it is another to actually work together to bring about real solutions to ensure this never happens again.

Last week the Australian Dairy Farmers held an important meeting with state dairy organisation presidents and processors to address a range of contractual issues which farmer organisations have been trying to address and rectify for 15 years.

During the meeting we discussed a range of topics including the difficult circumstances of farm gate price reductions, the introduction of new legislation on unfair contracts which comes into effect in November and the outcomes from the August Symposium held by Deputy Prime Minister, Barnaby Joyce.

This meeting provided an ideal opportunity for the dairy industry to unite and develop a voluntary industry wide code of practice on contractual arrangements with farmers.

The code will include:

  - greater transparency in contracts and supply agreements

  - ensuring a pricing formula or a price setting mechanism is clearly defined within a contract

  - ensuring pricing adjustments to farmers throughout a contract are clearly defined and that there will be no retrospectivity

  - while acknowledging step ups do occur and step downs have occurred in severe circumstances, a principle should be incorporated into contracts which clearly outlines that as much notice as possible is necessary if a step-down has to occur

  - ensuring farmers should receive all payments that accrue over the term of a contract or supply agreement – the final payments of a contract should not be contingent on the farmer being a supplier when, for example, the June payment is made in mid-July

  - ensure that where a processor has a contracted volume limit or a different price for volume above a particular level then exclusivity of supply to that processor must not occur

  - ensuring there is a clearly defined mechanism for giving notice of termination of a contract

  - ensuring there is a clearly defined mechanism of how contract terms and conditions can be modified and the farmer having the right to a negotiated variation, not simply a request from the processor.

Incorporating these principles into a code of conduct will give farmers, or their representative, the opportunity to have a contract or supply agreement which is truly negotiated and not simply an agreement which is a “take it or leave” it approach to farmer’s milk supply arrangements.

The ADF together with the state member organisations have worked hard since the crisis unfolded to ensure future milk supply agreements are balanced, fair and transparent. It has been a long process to get to this stage and a major breakthrough for the entire industry.

State dairy farmer organisations have been working to achieve these improvements for many years. By having a national organisation which is well resourced the States can achieve things together that would be impossible to achieve on their own.

We plan on finalising the draft code as soon as possible, ahead of the new legislation and before the Australian Competition and Consumer Commission inquiry into the dairy industry is finalised next year.

Now more than ever, the dairy industry needs to remain focused and united in its goals to achieve a shared vision of improving the profitability and sustainability of dairy farmers and the entire dairy industry in Australia.

David Basham

Acting ADF President

 

 



Collaboration key to dairy success

Jul 09, 2016

With the official announcement of last weekend’s election yet to be made, the dairy sector (like the rest of the nation) is watching very closely and working to ensure that all political parties understand our priorities. Whatever the outcome, it is essential that stability reigns – effective policy formation and clear action to overcome challenges will be otherwise impossible.

Australian Dairy Farmers (ADF) has made clear its priorities for the next government – extend and streamline access to the concessional loans and Farm Household Assistance for all affected farmers, create a safer, more resilient workforce, ensure secure sustainable access to water resources and above all, address the imbalance of market power within the dairy supply chain.

It’s good to see that all parties have recognised the importance of supporting our farmers through the current challenge, as well as committing to developing innovative solutions to building long term sustainability of our industry.

However, it is concerning to see some are still calling for a fresh milk levy – an unworkable solution. If a fresh milk levy was imposed, it would potentially result in farmers who supply domestic markets subsidising their export market oriented counterparts. This is not a workable solution.

There are also potential difficulties associated with such a levy breaching Australian Competition and Consumer Commission regulations as well as potential issues with the World Trade Organisation.

The fundamental issue our farmers continue to face is that they wear the bulk of financial risk in the dairy supply chain. We need a practical and viable solution to increase transparency in the way the milk pricing system works and to simplify milk contracts to ensure the volatility of the market is better balanced along the supply chain.

This week UDV and ADF met with farmers in South West Victoria – to hear concerns, answer questions and build feedback about the current supply chain into our policy work. This is one of many meetings ADF will continue to participate in throughout the year, to ensure we are effectively representing farmers’ interests.

The discussion was robust. Overall, the consensus in the room was that trust has been broken and we need to find a way forward.

The challenges faced by farmers in Western Australia due to processor decisions reinforce the sector as a whole is enduring tough times – no state is immune.

Collaboration is what will get us to where we need to be. Our industry relies on all the elements to operate effectively. Farmers need processors and vice versa – so the solutions will require input from all parties.

Beyond this the public and the government ignore us if we do not operate as one. If we have a hung parliament, dairy will need parliamentary champions to advocate our policy priorities and the industry must work together to feed them that case.

David Basham

Acting ADF President

Keeping an eye on the big picture

Jun 23, 2016

The first priority over the last few weeks has been to secure targeted assistance and roll out support to help farmers with their most pressing needs.

At the same time, we remain focused on the big picture – especially when it comes to water. It won’t be enough to help farmers get over this hurdle if their businesses later fall over because water is too scarce and expensive to stay milking in seasons to come.

We can’t control the weather. The recent rains are a welcome reprieve, but to make a substantial difference to the bleak outlook on water allocations for next season it will need to keep raining heavily in the catchments over the next few months..

So while we watch the skies, our priority remains achieving long-term objectives on what can be controlled. Environmental water trading, the Murray Darling Basin Plan and the Connections reset all have an important bearing on whether enough water will be available when farmers need it and at a price they can afford in 2016/17 and beyond.

We are advocating for State and Federal Government commitments to assist our industry by making more water available next season. Potential untapped sources include trade in northern Victorian allocations to urban centres such as Melbourne, as well as a share of the environmental water held in Victorian and Commonwealth accounts.

The amendments to the Federal Water Act last month mean that the Commonwealth Environmental Water Holder (CEWH) now has more flexibility to trade water it may not need. As of 31 March, the CEWH still had just over 300 GL in storage; while it has no plans to trade in 2016-17 at this stage, this may change as part of environmental planning now underway.

We also remain focused on the Connections reset. The announcement that only $388 million is left to deliver more than 100 GL savings was unwelcome news at a time when farmers already have so much on their plates. Now more than ever, we must get this reset right to provide sustainable infrastructure for a resilient dairy industry.

Once the election is over, we will be back in Canberra to keep the pressure on the elected party to achieve the Murray Darling Basin Plan’s environmental outcomes without removing any more water from irrigated agriculture.

State and Commonwealth Governments have an in-principle agreement to deliver the full 650GL in environmental offsets, and undertake more robust socio-economic assessment before any attempt to achieve more than the 2750 GL target. We are holding them to all of these commitments.

Early pricing signals essential

Jun 10, 2016


Many in the dairy industry feel under enormous pressure at the moment. Farmers not only have the challenge of adapting their business plans to recent price shocks – we also pick up the paper to read about it every day. With more processors' opening milk prices due in coming weeks, following Warrnambool Cheese and Butter’s (WCB) announcement today, no doubt some will feel the pressure begin to mount once more.

We recognise that the announcement from WCB will come as a shock to many, given it is well below the cost of production. Despite the disappointing low price, we must recognise that they have heeded calls for early price signals and provided much needed certainty to their suppliers.

While we are an industry under pressure, we are also an industry that has the know-how and motivation to overcome these adversities and thrive in the long term. No one is alone in this scenario and we need to ensure that all farmers feel supported during tough times.

ADF, together with our state members and Dairy Australia is fighting for our farmers. We can’t solve all of the issues farmers are currently facing, but we can work to relieve some of the immediate pressures and accelerate change to ensure this doesn’t happen again.

We have welcomed the promises made by State and Federal Government, now they must stop playing politics and deliver. Farmers need certainty as to their options right now.

While we await Government decisions, there are industry resources available to help farmers manage the impact of recent events. It’s important to make the time to take up these opportunities. Dairy Australia’s Taking Stock provides free one-to-one business analysis that can help you prepare for the season ahead.

The Dairy Farmer Central website launched this week by the Victorian dairy industry, lists all of these tools and more. It also signposts events - some of these events will inform and help you plan for the season ahead, others provide an opportunity to take time out from the farm and get some perspective. We are working to make this website applicable Australia-wide.

These tools are not a silver bullet to restore our businesses but they will help navigate the challenges, so we can move toward a stronger, fairer and more sustainable future.

David Basham

ADF Acting President

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