Opening Price vs Market Price

Jun 16, 2017

Over the past week, we have seen several milk supply companies announce their opening milk prices for 2017-18. While there will always be some variances in the opening prices for different companies this price generally reinforces the relative strength of market price improvement.

Further reinforced by Dairy Australia in their recent Situation and Outlook report, the improved outlook for 2017-18 offers sustainably better returns with indicative prices for the year approaching $6 /kg ms.

Bega and Warrnambool both stated their opening price of $5.50/kg ms. Over the years both companies have been very consistent with their prices reflecting the world market, and their farmer suppliers have been paid accordingly. We can be confident that the opening prices of both Bega and Warrnambool reflect the steady upward improvements we have seen in world market prices over the past 6 months.

This week we also saw the release of Fonterra’s opening price for the coming year at $5.30 /kg ms, which is Fonterra’s true interpretation of the market price and reinforces the variances in opening prices between companies.

A short while ago Fonterra announced it was going to pay an additional 40 cents/kg ms to all its suppliers for the 2017-18 year to account for the step-down and claw back it applied to its suppliers last year.

While most Fonterra suppliers welcomed this news, there has always been concern that the 40 cents compensation payment would be marketed as part of their price for the 2017-18 year.

In a recent meeting with Fonterra, ADF was assured the 40 cents would be defined as a payment on top of their market price for 2017-18 and not actually part of the price. ADF was concerned that this compensation payment if marketed as part of their opening price to farmers, could be used to give Fonterra a perceived unfair advantage over all other companies.

We believe that companies who did the right thing by their suppliers for the 2015-16 year should not be accused of lagging behind Fonterra’s price for 2017-18. The announcement of the additional 40 cents as compensation was for the major step downs and clawbacks Fonterra applied to their suppliers during May 2016.

So, it was with considerable disappointment that we saw Fonterra’s announcement of their opening price and the supporting media release from Bonlac Supply Company. In their communications, they portrayed their opening price to incorporate the 40 cents to make the price $5.70 /kg ms, which makes them look like they are 20 cents/kg ms ahead of the competition.

Not only is this unfair to other companies which are above the Fonterra announced $5.30 opening market price, but it is also misleading to all their suppliers. It is a fact that the 40 cents/kg ms to be paid to all Fonterra suppliers this year is a compensation payment for 2015-16 – and should not, at any time, be characterised as part of the market price for 2017-18.

This past year, ADF and our state member organisations have worked in collaboration with companies to develop a Code of Practice on Contractual Arrangements. Most of the dairy companies participated in the development of the Code and agreed that one of the most important elements of the Code was the need for greater transparency in pricing for farmers.

By monitoring the application of the Code with farmers, we will be able to assess whether companies are conforming to the transparency principals outlined within the Code of Practice.

There is a real danger that Fonterra’s current characterisation of the 40 cents/kg ms being added to their market price for the year will give the wrong signal to all farmers and other companies that transparency only goes a small way.

It is important that all dairy companies remain fair and transparent in their pricing. The inconsistencies have indicated Fonterra and BSC are not being completely transparent with their suppliers. These types of contradictions are nothing but misleading at a time when the dairy industry has committed to rebuilding trust along the supply chain.

John McQueen

Interim ADF Chief Executive Officer

 

Farm Life - Animal Health and Welfare

May 26, 2017

Farm animal welfare is a significant issue in Australia and overseas, and consumers are increasingly interested in knowing that a high standard of animal welfare is maintained throughout the supply chain of products they purchase.

Healthy and well cared for cows are a priority for every dairy farmer as it is central to having a successful and sustainable dairy farm.

There are many on-farm practices that have been part of dairy farming for hundreds of years and we must ensure we have a social license from consumers to continue the practices. We recognise that some things that happen on-farm can be confronting to people who are not farmers and may not understand the reason behind them. It is up to us to ensure the public understand what we do, why we do it and that at the core of every farmer is the health and wellbeing of their animals.

As an industry, we take our responsibilities for animal welfare seriously and are committed to continuous improvement of our animal husbandry practices. All farm animals must be treated with care.

We want our consumers to know farmers, processors, transporters and meat processors actively engage with each other to ensure all cows and calves are treated humanely.

The Australian dairy industry supports the Australian Animal Welfare Standards and Guidelines for Cattle as well as the Land Transport Standards and Guidelines. These were developed in partnership with the animal welfare groups and Government, and provide the industry with a clear vision that the welfare of all animals in Australia is promoted and protected by the adoption of sound animal welfare standards and practices.

We are continuously working to improve animal welfare standards to ensure we meet consumer and public expectations and expect all persons managing livestock abide by these standards to ensure best practice is observed on-farm.

It is a priority of the dairy industry to regularly review policies and practices in line with public perceptions and to invest in ongoing national training and education to ensure farmers constantly strive to go above and beyond the agreed standard.

ADF, in collaboration with Dairy Australia, and other industry partners continue to work with industry, Government and animal welfare groups such as the RSPCA to ensure the wellbeing of our herds in all farming systems.

John McQueen

Interim ADF Chief Executive Officer

 

Fonterra follows on from Murray Goulburn

May 12, 2017

Following on from Murray Goulburn’s (MG) announcement last week, Fonterra made a similar announcement yesterday.

It is important to note that the actions of MG and Fonterra in late April/early May last year has caused enormous heartache for farmers and the industry. Those impacted were hit hard and it will take a long time for the farmers to recover and rebuild not just financially but their herd sizes, their confidence, and their emotional well-being.

These financial hits on farmers should never have happened. 

Through no fault of their own, farmers who left MG or Fonterra, did so because they had no other financial option. The lack of reimbursement to these farmers from the MG MSSP and the Fonterra Australia Support Loans Package respectively appears discriminatory and unfair.

While ADF acknowledges that both MG and Fonterra will be reimbursing existing (and retired) suppliers, they have both made a point to deny those farmers who are no longer suppliers, yet were equally financially disadvantaged. 

ADF believes that farmers who were financially forced to leave their processor should not be forced to continue to bear the cost of processor actions. There are serious questions that must be answered about the fairness and equity of the financial impacts and treatment of those who had to move to other processors.

Trust and respect are important parts of any business relationship and this has been lost for many farmers who supplied and currently supply MG and Fonterra. Not only has trust and respect been damaged but so too has industry confidence, and this will take a long time to restore.

To ensure a positive future, our industry relies on all the elements to operate effectively. 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.

ADF will continue to work with both processors and farmers to rebuild confidence and trust. It will take time and will require a commitment by processors to treat their farmers as equal partners and with the respect they deserve.

John McQueen

Interim ADF Chief Executive Officer

 

Where to from here - the 457 visa

Apr 21, 2017

Dairy is a highly dynamic industry offering lots of opportunities for career growth and development. However, it is no secret that we have domestic labour shortages in regional and rural areas.

Our preference is always to hire Australian workers, but there are not always enough experienced farmhands to meet the demand of our industry. This is despite more than a decade of offering training courses and pathway programs for Australian workers to enter the dairy industry.

ADF has continued to lobby the Department of Immigration and Border Protection (DIBP) for regulation amendments to visas allowing overseas workers to fill vital on-farm and off-farm roles.

This week, the Government announced that the 457 Temporary Work visa will be abolished and replaced with the completely new Temporary Skill Shortage visa by March 2018. ADF is concerned with the changes and is seeking clarification on many aspects from the DIPB.

We have now been advised that the current visa changes will have no impact on the Dairy Industry Labour Agreement, which allows dairy farmers to recruit senior farm hands. We have been assured that:

  • our existing labour agreements remaining in effect;
  • our existing visa holders not impacted unless they apply for another visa impacted by the changes outside of the labour agreement programme; or
  • new nominations that we intend to lodge/related visa applications are not impacted – including applications for occupations which have been ‘removed’ from the standard programme or are now subject to a caveat in the standard programme but remain specified in our agreement.

We also understand that under these changes, which come into effect immediately:

  • dairy cattle farmers are included on the short-term skilled occupation list and only able to apply for a 2-year visa;
  • 2-year visas can only be renewed once, which will lead to an increase in administrative burden and red tape on farmers looking to access these new visas;
  • dairy, like other agricultural commodities is not included on the medium to long term strategic skilled occupation list to access 4-year visas; and
  • changes have been made to the Employer Nomination Scheme (subclass 186) visa and to the Regional Sponsored Migration Scheme (subclass 187) visa.

We are still in the process of gaining clarification on what will happen to current visa applicants who are waiting on approvals and the additional occupations available to support regional employers. 

ADF supports the employment of overseas workers to fill vital on-farm roles. We will continue to liaise with government to ensure dairy farmers that need to employ overseas staff can do so.

John McQueen

Interim ADF Chief Executive Officer

 

Select Tags