Destiny needs to be put in farmers’ hands, deregulation inquiry told

By Dairy News Australia

Queensland dairy farmers and organisations have fronted a Senate inquiry calling for more support in the dairy industry, saying the industry continues to face climbing input costs, falling prices and intervention is needed.

The Rural and Regional Affairs and Transport References Committee is examining the effect of deregulation on the dairy industry and exploring whether something should be done to correct any issues.

Fourth-generation dairy farmer James Geraghty said he had seen the dairy industry in Queensland change significantly since deregulation in 2000 and fears the future of his farm ends with him.

“In North Queensland we had 185 dairy farms at that time; we now have 51. Queensland had 1540 and they've just gone sub-300 in Queensland,” Mr Geraghty told the hearing.

“Queensland has been producing less milk than it consumes for many years. The shortfall is now in excess of 200 million litres a year and growing.

“We've got supermarkets buying milk from farmers or from processors and marketing it themselves. They're in absolute control of the milk once they negotiate a price from the processor. But they are also in absolute control of the price that they sell branded milk for.

“So the price of everything that we put into our cows has risen since that time. The price of grain is now at its highest during the drought.

“That is because the market — and for ‘the market’ read supermarkets — will not allow that price to rise.

“We're talking about profitability in the industry. The industry also includes processors, and if you want to have a look at a processor then look at Lion Dairy & Drinks.

“They purchased the entire business in Australia for somewhere around $3 billion, and they have just sold that for $860 million.

“They have written off up to $500 million a year. Profitability is not in the farming sector, it is not in the processing sector.”

SubTropical Dairy chair Paul Roderick started on his farm in 1994 before becoming farm owner and manager, now milking more than 350 cows producing more than 2.5 million litres of milk in the last financial year.

“Prior to the Australian dairy industry deregulating in 2000, we grew our business and margins through purchasing quota to access higher-returning market milk,” Mr Roderick said.

“As deregulation approached, we anticipated that our margin per litre would fall. Given this, we made the decision to increase the size of our herd to 150 milkers producing 1.1 million litres of milk.

“As I took on more of the responsibility of leading the business, it became apparent that our costs were increasing at a higher rate than our revenue. Our business was also operating in a more volatile environment.

“My view of the way forward is actually to bring all levels of the dairy industry, be they farmers, processors or retailers, into a more combined relationship that recognises some of the costs involved in the chain.

“Unfortunately, what I found over time is that we would have really good conversations with processors and we could potentially maybe have conversations with retailers, but we could never get an agreement on what constituted a sustainable price for that.”

It's a view Dairy Australia managing director David Nation sympathised with.

He told the inquiry the continued retail price discounting of dairy had resulted in capped returns for many dairy farmers, particularly in fresh milk states, leaving farmers to feel their product has been "devalued".

“These events have collectively smashed farmer margins and depleted farmer confidence, leading many to question their future in the industry.”

Mr Nation responded to criticism about Dairy Australia's levy model, saying the organisation continued to support the Queensland dairy industry.

“That subtropical region from Kempsey to Far North Queensland accounts for 5.5 per cent of Australia's milk production, and that subtropical region receives about 8.8 per cent of our funding despite regional activities,” he told the inquiry

And time for the industry is running out, according to Queensland Dairyfarmers’ Organisation vice-president Matthew Trace, who said the northern dairy industry was at a "critical stage".

“I believe the industry needs significant reform to place its destiny in the hands of its own farmers,” he said.

“These problems can be solved; however, they won't be solved by playing around the edges just to appease those who oppose the scary word ‘regulation'.

“Either government needs to take a path to regulation, which we know works for certain, or it needs to support the industry to solve these problems itself by supporting a new industry structure where the farmers’ own money currently collected in levies can be used effectively to fix our own problems in our own regions.”

The inquiry will report on the performance of Australia's dairy industry since deregulation in 2000 including the ability of Dairy Australia to act independently and support the best interests of both farmers and processors; the accuracy of statistical data collected by Dairy Australia and the Australian Bureau of Statistics; the funding of Dairy Australia and the extent of its consultation and engagement on the expenditure of levies revenue; the merits of tasking the ACCC to investigate how it can regulate the price of milk per litre paid by processors to dairy and farmers to ensure a viable dairy industry and alternative approaches to supporting a viable dairy sector.