Latest blog posts
Friday, October 21, 2016
Competition laws are about to change. Australian Dairy Farmers (ADF) has lobbied hard for these changes and worked with many different organisations to represent the needs of farmers.
Since January 2011, Coles and Woolworths have continued to cause unnecessary worry for farmers by devaluing products in the supply chain. Milk was the
first weapon of choice in their discount war as it was a household staple and something that consumers were emotionally attached to.
However, milk is not the only dairy product that has been devalued in the price war. Other Australian staples such as cheese, yogurt and butter have also seen a significant price drop that further provokes an already besieged industry.
After almost six years of unsustainable pricing, consumption of dairy in Australia has dropped. Data collected by Dairy Australia clearly shows that cheap dairy has failed to deliver on the major supermarkets claim that lower prices will increase consumption. Their marketing strategy has resulted in millions of dollars being taken out of the value chain, which has impacted severely on many dairy farmers.
The battle for the hearts and dollars of Australian consumers has distressed the dairy industry, threatened small shopkeepers and prompted a Senate inquiry.
In mid-March, the federal Senate launched an investigation into dairy pricing and whether Australia's supermarket giants engaged in anti-competitive practices.
ADF was at the forefront on advocacy and policy demanding change in an industry that caused unnecessary financial pain and worry for farmers through the devaluing of dairy as a product.
The senate inquiry resulted in the Australian Government issuing a draft amendment to the Competition and Consumer Act 2010 outlining a number of changes ADF has been pushing for.
Most significantly, the draft Bill enables the introduction of an ‘Effects Test’ into Australian competition law. The effects test is a logical tool in the Australian Competition and Consumer Commission’s (ACCC) kit bag that most other developed countries in the world have.
ADF has long-advocated for change to tackle big business misusing its power and reducing competition in markets. There is no silver bullet to fix the imbalance of market power that dairy farmers experience, however ADF, together with our state members, are continuing to fight for farmers.
Even though this is an ongoing issue, we are still pushing for the major supermarkets to raise the price of dairy to a sustainable level. This will ensure a fair price for everyone along the supply chain.
Acting ADF President
Friday, October 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.
Acting ADF President
Friday, September 23, 2016
Over the last few days, New Zealand based Fonterra lifted its forecast milk payout for the second time. On Wednesday the estimated Farmgate price was boosted by a further 50 NZ cents to $NZ5.25, while the company maintained its dividend payout to farmers resulting in a total amount of $NZ5.75 to $NZ5.85 per kilogram.
Australian companies are between 10 – 20 per cent below New Zealand’s latest forecast.
While Fonterra's announcement follows the increased global dairy prices at the Global Dairy Trade auctions, Australian farmers are still waiting for theirs. Although there are any number of reasons why we are behind New Zealand, it still makes for an interesting conundrum when Australia has a bigger domestic market and yet our prices remain unadventurously low.
This really highlights how volatile the world milk price is and why we need regular, clear and realistic market signals in Australia.
By establishing a commodity milk price index tool there will be greater transparency to allow farmers to make their own assessments on milk price forecasts. Farmers will be able to better balance risk along the dairy supply chain, especially when it comes to managing the effects of world milk prices.
New Zealand already has a milk price index and it works quite well, as they have over 90 per cent exports, and can set themselves against the world market.
In Australia we have a 65 per cent domestic market and a different export commodity mix which should deliver a higher price for Australian farmers than the New Zealand price in a low commodity market as we are in now. Therefore, Australia needs to have an independent commodity index rather than use New Zealand’s due to our different export commodity mix.
ADF has had extensive discussions with government on the proposed index and we are looking forward to help shaping this important tool. It’s vital we get this right so all farmers have the ability to use the global information to assist them when they negotiate supply contracts with processors.
The index needs to be independent and transparent with easily accessible data that isn’t hard or complicated to use. It needs to be updated daily to capture the latest market intelligence from around the world and should translate commodity market and currency trends back to Farmgate prices across Australia. The index should also deliver a forward-looking price indicator to capture restored certainty and decision-making resulting in improved farmer confidence, better on-farm investment decisions, and ultimately higher farm profitability.
We have no doubt that our processors will increase their milk price forecast which is why we support the index and want to ensure it is a true indicator of commodity prices and meets the requirements of the Australian dairy industry as a whole.
The index will also give farmers the tool to better understand the impacts of world market trends and to be better armed with questions of the company they supply.
Acting ADF President