Disillusioned dairy

Even though dairy prices were flying high when I took over the reins here as the hopeful but heavily indebted next generation in 2008, the Global Financial Crisis was already forming.

I could see the international commodity prices were going into freefall but, as late as October, our factory rep said there was no need to worry, our milk price wasn’t affected.

A few weeks later, as farmers were congregating for Christmas parties, the announcement came that our milk price could no longer defy gravity. From February, it would be 40 per cent lower. It was the first time the price had dropped like that in more than 30 years.

The entire industry kicked into action. Dairy Australia offered information sessions on budgeting and cost control measures while bankers rushed to refinance loans. I was impressed. It was a crisis but we all pulled together.

The fallout from the 2016 dairy crisis is different. There’s been the same flurry of post-crisis activity from Dairy Australia and the bankers but farmers want more than that and, two years later, we have not “moved on” like we did last time.

This morning, I woke to a flurry of activity on Twitter provoked by an opinion piece in The Weekly Times by farm consultant, John Mulvany.

John takes the lash to processors and farmer representative body, the UDV, saying both know there are big problems but are refusing to act.

“If nothing happens the industry will continue to decline and cost of production will rise. The lack of action by those who can create change is ‘underwhelming’.”
John Mulvany, The Weekly Times

I agree with John entirely, to this point but he loses me in the following and final sentences:

“They know they can achieve a better industry. But their short-term vision and focus on career paths have created a roadblock.”

I think that’s unfair and missing the real problem. The farmers who volunteer their time to make things happen are routinely rewarded for their efforts by getting slammed relentlessly on social media. Some of it gets pretty personal, too.

As one active volunteer and farmer, Lauren Peterson, tweeted, “…some of us haven’t given up but will if keep tearing us down. We’re not the enemy”.

The real problem is that, unless you’re one of the sheltered few already in some form of life-raft, it’s every man (and woman) for himself now. Not enough of us believe that change is even possible. We are too hurt, afraid and angry.

I’m not blaming anyone for that – I often feel much the same – but it’s hardly the mindset needed for cooperation, negotiation and innovation.

Ironically, processors fighting for our milk are unlikely to provide the leadership needed in case it’s not well received and they lose supply. Much safer to work behind the scenes recruiting key supply with special deals and locking in the masses with sign-on incentives.

What will be the circuit breaker?

On tomorrow in Yarram: practical help to future-proof the farm

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The days are rapidly getting shorter but the autumn break remains missing in action. That’s not terribly unusual around here – it has always been fickle – but it’s also very dry.

And, apart from those December downpours, it’s been very dry for a long time. There’s really nothing left in the soil but grass-seed-eating crickets. It’s a tricky time.

Do you sow new pastures now and hope a meaty autumn break (rather than one of those fizzer false starts) arrives in time to sustain the seedlings or do you delay until you’re absolutely sure, only to run out of growing time before winter?

Aaargh! It’s a race where thousands of dollars ride on backing the right horse. This kind of unpredictability makes farming risky (and expensive), not just for dairy farmers but cockies of every creed and commodity.

You need experience, expertise and a bit of luck to get it right.

Tomorrow: lunch with the climate, weather and farming experts for some great ideas

Farmers for Climate Action with the support of the Gardiner Foundation and the FRRR is bringing some insights from experts to town tomorrow to help us manage the shifting seasons.

Dr Luke Shelley from the Bureau of Meteorology’s Agriculture Program will present on the applying seasonal forecasting tools and long-term climate projections to farm decisions.

Ms Catherine Phelps, Dairy Australia’s Program Leader for Land, Water and Carbon will offer tactics and strategies for managing dairy businesses facing climate variability and long-term risks.

I’ll be going and, whether you’re dairying, beef, sheep or any other type of farmer, you’re welcome to come along too (they’re even laying on lunch at the Club Hotel).

Ring Corey Watts at Australian Farmers for Climate Action on 0428 000 037 or email: vic@farmersforclimateaction.org.au to reserve your spot!

Spreading the love at Easter

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Easter around here is beautiful. It’s a time when you get to see, in one glorious street parade, many of the selfless people who make our district tick.

Every Easter Saturday since I was in nappies, the town has stopped to watch the SES, CFA, Surf Lifesaving Club and a gazillion other volunteers do a hero’s turn around the Canary Island Palms that grace the length of the main street.

Actually, pretty much any sober community member is welcome to participate and they do. We waved to senior citizens rolling along on their mobility scooters, children on tinsel-festooned cattle-trucks-cum-floats, a small contingent of electric cars trailing a “The future is electric” banner and even a colossal black horse prancing anxiously as the Caledonian Pipe Band wailed behind him.

It’s a reminder of the diversity of a town so small that your own geneaology is public knowledge.

It’s the kind of event where you recognise people your father knew and introduce your own children to old friends in the same way your parents once did.

The theme of this year’s parade may have been “Wings” but it only served to remind me of our roots.

Time to stand up for rural Australia

I love a sunburnt country,
A land of sweeping plains,
Of ragged mountain ranges,
Of droughts and flooding rains.

– excerpt from “My Country” by Dorothea Mackellar

Dorothea Mackellar was too polite. When it comes to Australia’s fickle seasons, Mother Nature has always had a crabby streak but, these days, the old hag has become nothing short of vicious.

Maybe we’re partly to blame for relentlessly blowing our own foul emissions up her skirts. Whatever the cause, things have changed. This is different. And while I like to think of myself as a resourceful and resilient (aka “bloody stubborn”) type, this is too big to go it alone. We need to work together.

That’s why I joined Farmers for Climate Action and agreed to face the cameras for this ad, which went live last night.

Thousands of Australians are backing Farmers for Climate Action. Will you join us to help stand up for rural Australia?

 

 

 

 

How much is a dairy farmer worth?

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Owning and operating a dairy farm comes with special conditions: working all public holidays and weekends, starting at 5am and finishing at 6pm or so.

Your duties include animal husbandry, machinery and agronomy skills, coupled with the managerial responsibilities of a business that turns over about $800,000 annually.

But, erm, your pay? If you’re lucky, you get paid. As ABARES notes:

“Over the 10 years to 2015–16, the proportion of dairy farms recording negative farm business profits averaged 51 per cent a year.”
– ABARES, Farm Financial Performance

Since only half of us make a profit in any given year, many farmers simply do not pay ourselves for all the hours we work. Officially, though, we are due the grand sum of $28 per hour. This is the value of “imputed labour” – the work done by family members like Wayne and me that is unpaid.

As Dairy Australia explains in its DairyBase fact sheets:

“Imputed labour hours are valued at a standard rate per hour and reflect
what it would cost to replace those hours with paid labour.”
It’s about the same hourly rate promised to a fill-in nine-to-five handyman.
Handyman

 

It’s rather a lot less than the median $34.60 an hour paid to Australian male full-time employees. And, strangely, I can’t see how I could replace Wayne or myself for $28 per hour if one of us fell seriously ill.

Assuming we could find someone who, “under the direction of the owner or manager uses their expertise and skills in order to supervise and maintain the operation of a dairy farm,” that would be a Farm and Livestock Hand, Level 8 (FLH8).

Under the Pastoral Award, the minimum rate is $22.80 per hour, with time-and-a-half for overtime and double time for Sunday milkings. Assuming Wayne and I were only working 50 hours per week (the official industry standard for one FTE), the numbers look like this using Dairy Australia’s calculator:

PayRates

That’s dizzyingly close to $28, isn’t it? But it doesn’t include the 9.5 per cent superannuation guarantee payment. That brings the hourly cost up to $30.43, well over the imputed labour cost of $28.

But we’re still not finished. Full-time employees are also entitled to annual leave and sick leave. Unlike some businesses where things can be put on hold for the odd sick day or even week off, we’d have to hire a casual to fill their shoes. That tots up to 25 days.

Let’s assume that a person who can work unsupervised at FLH5-level (no management responsibilities) can cover those absences. If the fill-in person works the same hours as the employee on leave and is paid the minimum award rate with the 25 per cent loading for casual rates, it looks like this:

PayRatesCasual

If the casual works the same 50 hours per week as the permanent for four weeks of annual leave and another week of sick or personal leave, the cost of those entitlements is $7620 per annum.

Amortised over the 2552 hours worked by the replacement for me or Wayne each year, that adds another $2.99 to the imputed labour cost.

The bottom line

So then, at the minimum rate, the replacement for Wayne costs $27.79 plus $2.64 superannuation plus $2.99 in “fill-in labour” to cover leave. That’s $33.42 all up, without worker’s compensation costs!

Of course, I have made a lot of assumptions here, including that:

  • the owner-operator only works a 50-hour week (in line with industry standards)
  • the owner-operator works weekends and public holidays
  • farm work, which does not involve feeding and watering cows (such as milking), takes six hours on Sundays
  • there’s not a good-sized gang of other staffers who can take up the slack while the main person is on leave
  • someone of skill level FLH8 is needed full-time
  • you can recruit and retain a skilled FLH8 who is happy to accept the minimum rate under the award
  • the owner is still able to guide the business

These assumptions are based on the likely scenario for an average-sized farm, which milks 261 cows. Because there is about one FTE for every 100 milkers, there are only two-and-a-half FTE equivalents on the average farm.

Staffing such a farm with a mix of FLH8 and FLH5 creates two permanent full-time roles and other part-time family labour or maybe a relief milker. In the real world, you can’t divvy up that FLH8 role into several positions with lower pay scales.

The going rate

I asked CFM Dairy Recruitment‘s Fiona McIlveen for the going rate to replace myself or Wayne. Upwards of $80,000 per year, she said, which is the equivalent of about $31 per hour.

“For a smaller farm milking 180 to 250 cows, you’d be looking at a range of $80,000 to $90,000,” Fiona said.

“For more than 300 cows, it would be more like $80,000 to $120,000.”

Where does $28 come from?

Dairy Australia Workforce Development Program Manager Sally Roberts explained it this way:

“It is important that dairy farmers can make informed commercial decisions when entering into share farming or leasing agreements,” Ms Roberts said.

“Dairy Australia’s Fairness Affordability Calculator and the Leasing Property Calculator give farmers the tools and information they need to help safeguard the profitability of their business and manage some of the risks associated with such agreements.

“The imputed labour description used in both calculators provides an accurate market rate for the cost of labour on a commercial dairy farm.

“Dairy Australia recognises that farmers involved in the running of their businesses undertake the full range of activities within the dairy business. Some of their work is at CEO level, some is at production manager level and some at farm hand level.

“All of the work is vital to the effective operation of the farm business, but it all has a different value commercially.

“While both calculators were developed off a strong research base, they are intended only as a guide and, given the complexities involved in share and leasing agreements, there will be situations where other considerations come into play when calculating imputed labour costs.”

“Background:

  • The value of $1.00/kg MS to $1.10/kg MS is based on an analysis of DFMP and private consultant data detailing labour costs for dairy operations that were entirely dependent on paid employees to carry out the work of the business.
  • It is important to note that the value comes from the total amount spent on labour, including but not limited to wages, bonuses, work care insurance and superannuation.
  • Publicly available data on this topic is available from the Dairy Farm Monitor Project.
  • The data indicates the total commercial labour cost for a farm fully dependent on paid employee labour ranged from $0.86/kg MS to $1.44/kg MS, with an average cost of $1.09/kg MS.
  • These calculations were based on data obtained from dairy farms in Tasmania and Victoria in 2013/14, which was when the Share Dairy Farming in Australia Model Code of Practice was released.
  • DFMP for the 2016/17 financial year shows dairy farm businesses relying entirely on commercial labour have paid between $1.03/kg MS and $1.23/kg MS, with an average of $1.13/kg MS
  • Dairy Australia is in the process up updating both the Fairness and Affordability Calculator and the Leasing Property Calculator to reflect the most up-to-date data.”

What does this mean?

Using Dairy Australia’s own calculators, it’s pretty clear that you could not legally replace me or Wayne for $28 per hour and Dairy Australia’s own process for arriving at the figure does not appear to take employment law into account.

Why it matters

Such a low figure for imputed labour distorts the view of profitability at the farm gate.

If we “pay ourselves” at this rate, we look more profitable than we really are, which means policy makers can continue to shake their heads as farmers demand a greater share of the pie.

More importantly, what message does this send to the next generation of farmers?

Twenty-eight dollars an hour would not be enough, even if we were to earn it in real life rather than on a spreadsheet.

Fonterra: no Chinese milk coming to Aus

Fonterra logo

An NZX announcement today celebrated a partnership between Fonterra and A2 Milk Co. It also seemed to suggest that Fonterra had plans to put Chinese milk on retail shelves in Australia and New Zealand. Not surprisingly, farmers took a great interest!

Milk Maid Marian is grateful to Fonterra Australia’s Matt Watt for setting the record straight.

MMM: Fonterra’s NZX announcement states: “The partnership encompasses…Exclusive period to explore a2MC branded butter and cheese, and China sourced liquid milk for sale in Australia, New Zealand and China. These relate to other dairy products not presently marketed by a2MC and would be complementary to Fonterra’s existing portfolio of dairy products.”
Will Chinese milk be sold on retail shelves in Australia and NZ under the agreement?

MW: There are no plans to sell Chinese milk on retail shelves in Australia. The China sourced liquid milk under this partnership would be retained in China for sale there.

 

MMM: Which other Chinese dairy products will be sold here?

MW: No products

 

MMM: Why will the milk be sourced from China?

MW: For fresh milk, it makes sense to source the milk in country if possible – in China we can do this for the local market and be confident on our quality control on our farms there.

 

MMM: Problems surrounding Beingmate, which has a large stake in Fonterra’s Darnum plant are well publicised. Will Darnum process less nutritional product in the future?

MW: As an investor in Beingmate, we are disappointed with their performance, and this is being worked through by the Co-op as one of the higher priorities to get the investment back on track.
However, Darnum is running well and the plant is almost at full capacity which is why we’re investing to unlock more capacity. In the last two years we’ve seen nutritional volumes treble at Darnum, and this partnership with the a2MC enables us to further grow volumes with confidence.

 

MMM: Will farmers with A2 milk be preferred suppliers in Gippsland?

MW: We now need to work through the plan to develop the A2 milk pool here in Australia. This is an important step for us but we also need to be clear that our broader milk pool and cheese/whey/nutritionals strategy remains at the core of what we do so all suppliers of high quality milk are valued by Fonterra.

Milk Choices: let’s explore this further

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Milk Choices explores an open market for milk at the farm gate

A team of volunteers has just launched a novel idea: what if dairy farmers could sell our milk to more than one customer? It’s a radical concept in dairy circles but not for any other business.

The volunteers have called the concept “Milk Choices” and say the time is right for a fresh look at the way milk is traded at the farm gate. And why not?

When the Milk Choices group asked me to help explain the idea, I jumped at the chance. It’s always important to consider the alternatives and this one may well change things for the better.

Put simply, Milk Choices involves an open market for milk would help farmers and processors manage risk and increase their profitability.

It’s not a working model yet – just a concept – and the Milk Choices team wants all of us to have a say in how it develops.

I’d highly recommend learning more at the Milk Choices website and, if you can make it, hear Scott Briggs present the idea in person at the Australian Dairy Conference this week.

To get inspired, take a look at the quick little video below.

 

 

Milk price index prize goes to…

An email sent to dozens of processors by Australian Dairy Products Federation chief, Dr Peter Stahle, has revived discussion about just who will do the analysis for the Milk Price Index (MPI).

It’s the latest twist in what can only be described as a “peculiar” chain of events to dog the rollout of what was billed as a $2 million solution offering transparency in farm gate milk pricing.

In the email, Dr Stahle wrote:

“…the group agreed that the Department would work to deliver, before the end of the financial year, a two-part MPI along the lines of:”

“Part 1 – A commodity price index based on global data, which would additionally indicate near-term trends

“Part 2 – Specific regional supplements that would, with brief commentary, refer to how farm gate prices had been impacted by market conditions. This would include a median price paid for milk (with a range), developed through a survey of farmers in the respective regions.

– extract from ADPF email dated February 6, 2018

During a phone call, Dr Stahle told Milk Maid Marian that industry was yet to see the final proposal and that the details remain open to negotiation and refinement.

Dr Stahle said it was proposed that, through ABARES, the Department of Agriculture and Water Resources would conduct the background analysis and deliver the index.

Meanwhile, Dairy Australia’s Charles McElhone said the involvement of a private consultant had not been ruled out. Although DA has consistently said it will not deliver the MPI, Mr McElhone said the research body would assist whoever was responsible for the analysis.

To ensure participation and a sense of ownership by dairy farmers, Dr Stahle said it was hoped that state dairy farmer organisations or other farmer representative bodies will engage in the delivery of training on the use of the index.

Can do attitude: a dairy daughter’s tribute

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Dad, Mum and my brother Andrew at Wilson’s Prom

It never occurred to me that there were any limits for women during my childhood. My strong, stoick mother had it all: an off-farm teaching career that was as much vocation as occupation; family; weekly squash competitions; a trumpet; horse riding; a massive garden encircling a newly-built home and the farm.

But I did confuse what it is to “have it all” with “do it all”.

It was Mum and we kids who raised the calves before and after school, Mum who built the calf shed out of hand-mixed concrete and recycled iron, Mum who managed the finances.

She was no matyr but she did work smart and very hard. Everything was organised to the nth degree and time was a precious commodity.

Now Mum lives on the other side of the state but something of her continues to live on here, too. While I had no doubt that women can do anything, even after a neighbour told me girls were only good for getting married, I suspect the thought has never even crossed my daughter’s mind.

Times are changing, yes, but my mother’s legacy will endure for generations.

 

Weird farm facts: what does a cow and a hair dryer have in common?

via GIPHY

Yep, it’s a heatwave. Dairy cows hate heatwaves. How much? Take a look at some of these weird facts from Dairy Australia’s Cool Cows website:

  • Each of our dairy cows gives off body heat equivalent to a 1500-watt hair dryer on a hot day.
  • Cows eat 10-20% less when the air temperature is more than 26°C.
  • A cow making more milk is more easily heat stressed.
  • Each dairy cow can drink 200-250 litres per day in hot weather – double the normal intake.
  • A heat stressed cow makes less milk for one to two days afterwards. If she’s heat stressed for two days in a row, milk production can be affected for a fortnight.

Suffice to say, the weatherman has our attention. Farmer levies fund a Temperature Humidity Index (THI) forecast that gives us a heads-up on just how tough it could be on the cows.

A THI of over 68 has a measurable impact on milk production, not to mention our cows’ wellbeing. As you can see, the forecast has us reaching a THI of 83. Nasty.

THI

THI Dairy Forecast http://dairy.katestone.com.au/

We’re onto it. To help keep the cows cool, we milk earlier in the morning and later in the afternoon when the sun is low.

The cows have a paddock with enough shade and water for everyone that’s close to the dairy. We serve up a light meal of silage just beyond the trees, so they can sneak out from the shade, have a nibble and go back where it’s cool for a nap.

The dairy yard is sprinkled with water, giving the cows a welcome shower while they wait to be milked. Inside the dairy, ceiling fans whir above the cows for maximum comfort.

There are three water troughs on the way to the night paddock, which is a juicy crop of emerald-green millet. Better than being at the beach!

via GIPHY