Mar 03, 2017
It is no secret that gas prices are on the rise.
An essential resource, gas is used to pasteurise milk and produce the heat needed for our driers to create milk powder.
Gas is already a significant input cost for dairy processors in Australia. Based on reports, gas prices are forecast to rise between 50-100 per cent by 2019. This will impact the processing of dairy and increase the manufacturing costs of milk products. The impact of any gas price rises can and will be felt by dairy farmers through their processors.
The rise in gas prices are due to supplies being diverted to meet international liquefied natural gas supply contracts, low levels of exploration and forecast production, restrictions on onshore exploration and development in some states and territories, and infrastructure constraints. Tighter gas supply translates to higher gas prices.
As the laws of supply and demand would suggest, Australians, sitting on bountiful gas reserves, should be enjoying cheap gas prices. But that’s not the case as a high percentage of our gas is being exported overseas.
Further to this, last year, the Victorian Government with bipartisan support banned unconventional gas exploration, including the controversial process of hydraulic fracturing (fracking), and extended a moratorium on onshore conventional gas exploration until the end of the decade.
New South Wales and Tasmania also have various bans on onshore gas exploration and development in place. This means that the competition by domestic and international consumers for gas from existing fields will intensify, which will drive up prices further.
There are surely many policy levers that can be considered in this environment. One such lever was implemented more than 30 years ago, and formalised in 2006, as the North West Shelf offshore gas production was being developed. The WA Government implemented a policy of domestic reserve of 15 per cent to ensure their domestic market was not adversely impacted from the development of export markets.
It is understandable why many communities and farmers are concerned with hydraulic fracturing (fracking), and why there was bipartisan support to ban this type of unconventional gas exploration. However, we support onshore conventional gas mining which currently has a moratorium and, according to the Australian Competition & Consumer Commission, is needed as insufficient reserves exist for domestic and international demand.
In response, the COAG Energy Council will be implementing a package of reforms. Even so, there is still uncertainty whether sufficient gas will be available to meet future domestic demand.
The dairy industry along with other manufacturers are concerned about the policy failures in Australia when it comes to gas availability and prices. We need to add our voice to the growing list of industry groups who are calling for urgent action to address the shortage of gas on the domestic market.
Interim ADF Chief Executive Officer
Feb 09, 2017
Last week ADF were asked to speak at the Senate Inquiry in Shepparton, Victoria.
Before it was our turn, we listened to a number of dairy farmers from the region offer valuable insight into an industry that has seen its fair share of hard knocks.
Centred around a few general themes, the dairy farmers talked about having greater transparency between processors and suppliers, contract fairness, and a lack of faith with industry body leadership.
Firstly, we believe that the dairy industry needs improved contracting arrangements between farmers and processors; greater transparency through earlier and clearer pricing signals for farmers; and less risk for farmers and more balance in risk along the supply chain.
In relation to greater transparency, ADF is in the final stages of completing the draft Code of Practice. We have worked in consultation with our state member organisations, farmers and processors, and the ADIC to develop a Dairy Industry draft Code of Practice for contractual arrangements to help ensure greater transparency and fairness in milk supply and pricing. This will also minimise the chances of what happened in April/May last year being repeated.
ADF believes that it is important that contracts are fair, simple, realistic and easily understood by both parties ensuring there is more balance for farmers along the supply chain. The Code of Practice will help ensure that supply agreements and contracts comply with the Unfair Contracts law that came into effect on 12 November 2016.
This unfair contracts legislation extends existing protections against unfair contracting practices and is a practical step, that when coupled with the dairy industry Code of Practice, will provide dairy farmers with fairer and more transparent contracts.
ADF will continue to work with farmers, processors and our industry bodies to build a system that builds resilience, rather than leaving farmers vulnerable.
Lastly, while it is important to acknowledge the things we do well as an industry it is also important to recognise the things that we could do better. The farmers have spoken and we have listened.
While we are busy working on and achieving important outcomes for farmers, a lot of work goes on behind the scenes that we don’t often communicate to our members well enough. We hear this and are endeavouring to do better.
It’s also important to note that the ACCC Inquiry into the Dairy Industry has started. If you are a dairy farmer and can attend one of the public forums the ACCC needs to hear from the ‘horse’s mouth’. The key issues to be considered in the Inquiry include competition between milk processors, the effects of private label products and pricing, contractual practices, availability of price, global markets and key factors influencing the profitability of dairy farms.
The next public forums will be held on:
- Tuesday 14 February 2017, Traralgon, VIC
- Monday 27 February 2017, Warrnambool Golf Club, Warrnambool, VIC
- Tuesday 28 February 2017, Shepparton Golf Club, Shepparton, VIC
- Thursday 16 March 2017, Mercure Sanctuary Golf Resort, Bunbury, WA
- Monday 20 March 2017, Hahndorf Football Club, SA
- Wednesday 22 March 2017, Burnie Golf Club, Camdale, TAS
For more information and to register your interest please visit https://consultation.accc.gov.au/compliance-enforcement/accc-dairy-inquiry-farmer-consultation-forums/
Interim ADF Chief Executive Officer
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.
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
Interim ADF Chief Executive Officer
Dec 22, 2016
As you may have heard, David Basham stood aside as ADF President last week for a period of three months. His decision to run for the Seat of Finniss in the South Australian State Government came about quite suddenly, we wish him every success with his campaign.
Another announcement was the appointment of Terry Richardson to act in the role of ADF President. Terry Richardson jointly operates a dairy farm with his
family in Deans Marsh, south west Victoria, where he has lived since 2004 and has a 550-milking herd.
Terry was appointed as an Australian Dairy Farmers Business Director in November 2015 and was the logical choice for acting President due to his background and experience.
Holding several positions in the dairy industry, both in New Zealand and Australia, he was a director of Kiwi Co-operative Dairies for seven years as well as a dairy consultant with Agriculture New Zealand. After moving to Australia, he joined his local UDV branch and was later appointed to the South West Regional Extension Committee. He was previously Chairman of Warrnambool Cheese and Butter Company and has been a director of the company for eight years, a role he still holds.
There has been some talk in media circles that Terrys position at the Warrnambool Cheese and Butter Company is a potential conflict of interest.
The ADF Board asked Terry to act as the ADF President during the period of leave David has taken from the ADF Board. Members of Boards of most organisations can occasionally have circumstances where there could be a possible conflict and the important thing is that the Board members recognise the possibility of conflict and manage it accordingly.
This year has presented unprecedented challenges for the entire dairy sector. ADF has remained focused on laying strong foundations that builds resilience rather than leaving farmers vulnerable and we will continue to advocate strongly on their behalf.
The events of 2016 have given ADF the opportunity to really cement our working relationships with state members - QDO, NSWFarmers, SADA, TFGA, UDV, WAFarmers, and industry partners such as Dairy Australia and Australian Dairy Products Federation.
Continuing to work together will give us the know-how and resilience to support dairy farmers to overcome adversity and thrive in the long term.
This season has been one of the kindest seasons we have had in many years. The extended season of grass growth has improved bottom lines and with world market prices continuing to strengthen over the second half of the year, things are looking much better for the future than they were mid-year.
May 2017 treat everyone in the dairy industry better than 2016 and we wish everyone a Merry Christmas and a safe, prosperous New Year.
Australian Dairy Farmers