Cheap milk issue raised at inquiry

By Dairy News

A RECENT inquiry into the NSW dairy industry has found producers are caught in a cost-price squeeze, leaving farmers to operate on the slimmest of margins.

The committee of the NSW Parliament has produced a series of recommendations.

The committee findings challenge the opinion of the ACCC that the selling of milk by major retailers at $1 per litre does not directly impact the price paid to farmers.

‘‘It is clear to the committee that the price being paid to farmers for their milk supply has not kept pace with the increasing cost of production,’’ chair Robert Brown, MLC, said after the inquiry.

‘‘The committee is particularly concerned by the evidence of farmers who told the committee that they cannot draw even a modest wage for themselves from their farming businesses.

‘‘While it is clear that recent drought conditions have added pressure to dairy farmers, the committee considers that the drought has not caused, but exacerbated, the structural problems within the industry that are resulting in poor outcomes for farmers.’’

This committee has found, based on the evidence before it, what is intuitive to even the casual observer and abundantly clear to farmers themselves: that retailers selling milk for $1 per litre has removed considerable value from the dairy value chain.

This has contributed to financial pressure on NSW dairy farmers.

‘‘Dairy farming businesses are clearly struggling to survive and this committee is greatly concerned both for the sustainability of the industry and for the wellbeing of farmers.’’

The Dairy Farmers Milk Co-operative advocated the role of collective bargaining groups for suppliers.

‘‘Individual dairy farmers have a low level of bargaining power when negotiating with processors,’’ it’s submission to the inquiry said.

‘‘We have all seen the recent example where a number of Western Australian milk farmers were abandoned by their current processor.

‘‘In DFMC’s opinion, an effective collective bargaining mechanism, both as to price and terms and conditions, is fundamental to the dairy market being fair to everyone (and, in particular, the farmers).’’

Finley farmer Ruth Kydd raised a number of issues in her submission to the inquiry, including the impact of red tape on farm efficiency, the unilateral cutting of her farm’s bore water licence, inconsistencies between management of Victorian and NSW groundwater, the bureaucratic paperwork involved in securing skilled worker visas, the management of the Murray-Darling Basin Plan and the power imbalance between farmers and processors.

After the release of the committee’s report, Mrs Kydd expressed some disappointment that some issues had not been addressed and she hoped that the committee’s wish for further time for a more thorough examination would be granted.

She said the committee’s investigation appeared to be rushed and did not visit the largest dairy production region in the state.

On the mandatory code for the dairy industry, Mrs Kydd said more control was needed to prevent bizarre practices such as requiring a new owner of a dairy farm to continue supplying milk to the same processor, or compelling suppliers to accept farm gate price reductions, but not having the benefit of price increases.

‘‘I was on the board of Dairy Connect for some time and we were told of some unfair practices which the bigger companies tried to adopt,’’ she said.

Mrs Kydd said the code should also require processors to have their milk testing laboratories independently tested for accuracy, because she had seen some evidence of variations between processors when given the same milk.

Farmer calls for retail levy paid to suppliers 

Phil Ryan, a dairy farmer milking 200 cows near Bega on the NSW far south coast, argued for a levy applied to all retail dairy products at the rate of 10¢/litre, to be paid back to all suppliers.

Mr Ryan, an inaugural member of the Bega Cooperative Society, made the suggestion to address the issue of suppressed retail prices applied by the big grocery retailers.

“The Dairy Australia levy process, which takes a levy off all milk produced in Australia, could be relatively easily reversed to distribute this levy,’’ Mr Ryan said, in a submission to the NSW Legislative Council inquiry into the dairy industry.

“It can be managed as an insurance policy, if you will, to manage free trade issues. The means to do this exists, the will to do it is lacking, as shown by recent drought levy shenanigans by retailers.

“This simple step likely makes the NSW industry sustainable – it needs to be applied nationally, for all farmers.’’

Mr Ryan also argued governments should give higher priority to dairy in free trade negotiations – New Zealand has lower tariffs for dairy into China, Japan and Korea.

“We need to be competitive with New Zealand in these key export markets,” Mr Ryan said.

“Governments should also address EU and US subsidies for their dairy industries, enabling Australia to compete effectively in the international marketplace.

“Also critically, this enables us to compete effectively in our domestic marketplace. Domino’s Pizza and Aldi import their cheese from the US cheaper than it can be supplied locally because of US Government support for their dairy industry.’’

Mr Ryan urged mandatory and effective country of origin labelling legislation.

“Woolworths Hillview $6.60/kg cheese from New Zealand is sold in green and gold packaging – it looks Australian, it is packaged in Australia, but it is produced in New Zealand.

“Mainland cheese from New Zealand is sold in our supermarkets at a premium price beyond that of our Australian equivalents ($18/kg versus $11/kg),” Mr Ryan said.

He suggested regulators look at the impact of “food miles” labelling which indicated to consumers how far dairy products had to travel.

“Cheese imported from the US, as a bulk commodity, just doesn’t seem right, or even Victorian milk trucked to northern NSW and Queensland.

“Something that says, this cheese was made in the USA, and was flown/shipped 14 000 km might provide a consumer reaction that supports Australian products, while saving on fossil fuel consumption.’’