Nightmare November, divine December?

With about half the normal rainfall in October and about a third of normal in November,  the silage harvest was, well, wanting.

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We’d barely gotten the last bale off the paddocks when, one Tuesday morning, Clarky sounded the alarm.

“You’d better get Marian straight down to paddock 19 to have a look,” he said.

Now, Clarky is the king of the understatement. Nothing from snake to bushfire seems to rattle the fellow so, when, he said, “straight down”,  I dropped everything to investigate.

It was an invasion. Marching from west to east were legions of centimetre-long army worms.

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A few of the voracious Army Worm larvae

Army worms are as destructive as a team of teenage footy players on grand final night. They descend en masse and literally eat everything in sight.

They weren’t anywhere to be seen the day before and were suddenly in plague proportions, crawling across the track, aloft on ryegrass stalks, wriggling along the rim of the trough.

A careful inspection of the paddocks revealed a heavy infestation from boundary to boundary. The choice was stark: spray or pray.

After a sub-par Spring, this was the last thing we needed. The caterpillars would very likely leave nothing for the cows to graze. On the other hand, spray is the method of last resort.

As the sun moves overhead, army worms retreat to the cool spaces at the base of the pasture, unseen and untouchable. Spraying has to be done at dawn or dusk and the chemicals are nasty, killing pretty much every living thing – good and bad – they touch.

We may not have an organic farm but we don’t like pesticides. It’s much better to let the beneficial insects, like the beautiful Glossy Shield Bug identified for me on Twitter by Dr Manu Saunders (@ManuSaunders), keep the nasties in check.

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Juvenile glossy shield bug (Cermatulus nasalis)

But when you have a plague like this following a Spring drought and a forecast game-changing big rain is on the way?

The Department of Ag reckons “spraying is recommended when the density of larvae exceeds 1 to 3 larvae per square metre”. That made me giggle nervously, given our infestation of “too many to count” per square metre. Reluctantly, yet desperately, I put in the call and quarantined the cows in a separate section of the farm.

Four weeks on and the worms have all but disappeared, continuing to flourish in just a couple of paddocks where excess leaf litter provided cover.

When the drenching December rain came, I was grateful I’d taken this path. With the army worms vanquished and drought broken, the cows were free to graze lush grass again.

While I hate using pesticides, I have a sneaking suspicion I’d better get used to it.

The Department notes:

“Major outbreaks occasionally occur across Victoria, particularly after periods of drought. There are many factors which may lead to an outbreak. They may arise from large invasions of moths which have bred in arid regions of New South Wales, South Australia or western Queensland. Alternatively, they may arise because of significantly less mortality of eggs and young caterpillars. Droughts appear to trigger outbreaks because of the adverse effects they have on the natural enemies of armyworms; these predators and parasites are much slower in recovering from a drought than are armyworms.”

As the climate becomes more volatile, we can expect wild swings in bug populations, too. Sorry, Tony, it’s not beneficial but, yes, I guess it’s just part of farming.

ACCC delivers a ladder for dairy farmers

All I could think as I scrolled through the interim ACCC dairy report was “Wow!”. Any fears farmers had that the ACCC would fail to understand the intricacies of our industry have been well and truly put to bed. This report proves the regulator gets it.

“…the problems we have identified in this inquiry emanate from the inherent bargaining power imbalances in the industry, particularly between processors and farmers.”
– p. 22, ACCC Dairy Inquiry Interim Report

While there are more than 200 pages of very interesting information, the really important section deals with the regulator’s eight recommendations:

1. Processors and farmers should enter into written contracts for milk supply that are signed by the farmer.

2. All processors should simplify their contracts where possible, including by minimising the number of documents and clearly indicating which documents contain terms and conditions of milk supply.

3. Milk supply contracts should not include terms which unreasonably restrict farmers from switching between processors.

4. The industry should establish a process whereby an independent body can administer mediation and act as a binding arbitrator or expert in relation to contractual disputes between farmers and processors.

5. Farmers should ensure they have properly considered the legal and financial implications of contracts with processors.

6. Processors should publish information identifying how their pricing offers apply to individual farm production characteristics to enable better farm income forecasts.

7. The Voluntary Dairy Code should be strengthened
Notwithstanding Recommendation 8, the Voluntary Code will continue to operate for at least the short-to-medium term. The following amendments should be made:
(a) processors to include a comprehensive dispute resolution process in their milk supply agreements, including where this relates to compliance with the Voluntary Code itself
(b) processors to provide timely price and other contract information before requiring farmers to make a decision about renewing a contract.
(c) with regard to section 6 of the Voluntary Code, removal of the incumbent processor’s first right of refusal regarding a farmer’s supply of milk to an alternative processor.

8. A mandatory code of conduct within the Competition and Consumer Act 2010 should be considered for the dairy industry.

It’ll take time to digest the report properly and I’m betting that some of the details will be hotly debated over the next few weeks. That’s a good thing.

This ACCC inquiry is not a whitewash. The system is broken and such a strong report offers us a way to climb out of the deep hole we’re in towards the light.

A new big Aussie dairy co-op?

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Fonterra Australia’s managing director, René Dedoncker

“It’ll be months, not years,” says Fonterra Australia’s managing director, René Dedoncker when I ask him about plans to form a new big Australian dairy co-op.

Industry veterans will tell you the idea of Fonterra forming an Australian co-op is not new and seemed a real possibility after the demise of that other great milk co-op, Bonlac, in the early 2000s. So, why now?

“I think the time is right,” says René. “This is a value proposition at a time when the industry is fragile.”

“Fonterra Australia is also in a great position to reduce risk. We have learnt from our mistakes and have a stable, repeatable business model with a balanced customer and product mix. Confidence, if not trust, is running high.”

I cough a little nervously and ask René how he expects farmers would rate Fonterra in the trust stakes and whether that might be a problem.

“Trust may well be a stumbling block.” he concedes. “Farmers – even those who’ve been supplying us for many years – tell me it will take years to rebuild. Purely on trust, we could well be ranked quite low but we are working hard to regain that.”

“I can tell you that there is not a key decision made without the input of farmer voices.”

The consultation on the co-op idea will officially begin at the Bonlac Supply Company AGM next week and be discussed at farmer forums across the country.

If it gets a sufficiently warm welcome, the next stage in the process will be discussions about the form the co-op would take.

“We already have several different models in mind,” René says, “but at this stage we want to keep it simple and see whether there’s an appetite for this co-op.”

What Rene can say is that there won’t be a mandatory requirement for farmer suppliers to “share up”, matching share numbers to milk production.

“We need to make it attractive and give everyone an opportunity to participate. Farmers will also be able to supply Fonterra Australia without becoming shareholders,” he explains.

It’s also decided that the shares would be in the Australian operation only, rather than the global Fonterra organisation. The Australian co-op has the blessing of the board of directors but would not need to clear a Kiwi shareholder vote.

The plans towards forming a co-op has “paused” the progress of a replacement for the Bonlac Supply Agreement, René says. While that replacement has already been drafted, it won’t be made public until it’s clear it would suit any new co-op model.

It has done nothing, however, to dampen Fonterra’s Australian expansion plans. The processor has already committed to lifting its processing capacity by another half-a-billion litres over the next six months and will add another half-a-billion within 18 months.

While René stresses that the 3 billion litre target is in capacity rather than milk supply (allowing enough headroom for a bumper season), he says the processor is aiming for a milk supply of 2.6 to 2.7 billion litres within two years.

At the same time, Lino Saputo Jr is on record saying Warrnambool Cheese & Butter will win back the milk MG lost. And, of course, the main beneficiaries were Fonterra and WCB itself.

“What about Saputo?,” I ask.

“We’re running our own race,” says René. “We have incredible confidence in our business and they’re offering powerful competition that’s good for our industry.”

“It might be better to ask Saputo about us.”

Bad moon rising?

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Hear no evil Pic credit: Apartline.de

It’s no secret, the last couple of years on the farm have been bloody tough. The 2015 drought cut deep here, only to be followed by the dairy debacle of 2016. Now the historic agreement to sell Australia’s last big co-op has us in unchartered waters.

We just need a bit of a breather to recover and keep our heads above water.

During the last two years, we’ve closed down spending as much as possible. We haven’t sacrificed feeding cows or looking after our soils but, beyond that, if it could wait, it did.

It means we have some maintenance to catch up on, especially the farm laneways that the cows use to get to and from their paddocks. Maintaining tracks is expensive and we have the equivalent of a very good year’s profit to make up as well as new debts to repay. It hasn’t been a very good year yet.

So, you can imagine how it felt when I heard Freshagenda’s revised forecast for next financial year, which basically said milk prices are headed down again. Not good. Demoralised and, honestly, rather cranky.

But is there really anything to worry about?

After all, a year (or even half of one) is a long time in dairy commodity pricing. Freshagenda notes there are plenty of variables, like exchange rates, the weather in New Zealand and even the Russian ban on dairy products, that can all still make a big difference to the outcome.

This farmer’s left wondering whether it’s safe to let the moths out of the cheque book for that much needed maintenance.

If I spend too much, there might not be enough left in the kitty for another tight year. If I keep the hatches battened down, the tracks will cost a fortune to bring back to square one in another two years’ time.

While all of that is a big deal for me, others argue there’s much more at stake. There’s the psychological impact on farmers for a start.

If social media is any guide, plenty of farmers have had a gutful of industry turmoil and tight times. Some of them will curl up into a little ball, some will grin and bear it, while others will simply walk away.

I’ve heard farmers suggest it’s irresponsible to publish something like that when the industry is on a knife edge. Others worry that the processors will use commentary like this to jawbone the farmgate milk price down.

Either way, they argue, it could help to dampen milk production for another year, reducing Australia’s ability to be an efficient, reliable exporter.

With all this in mind, it’s not surprising Freshagenda has copped a bit of flack. Its founding couple, Jo Bills and Steve Spencer, shouldn’t be surprised. Dairy Australia famously stopped issuing similar forecasts after similar blowback.

Asked for comment by Milk Maid Marian, DA explained its approach this way:

“Dairy Australia exists to provide our farmer stakeholders with the most accurate and up to date information so they can make informed decisions around their business practices.”

“Our role in this space is to provide an unbiased view on current market trends and drivers, through publications like the Situation and Outlook report.

“Milk pricing varies greatly from processor to processor and farm business to farm business. Our approach is to provide the information and insights that farmers can apply to their own context, and draw much more meaningful conclusions than an industry ‘average’ price.

“DA moved away from providing an exact prediction on milk pricing for a number of reasons, these include:

–          The risk of eroding competition for milk and unduly influencing market decisions made by processors.

–          The industry is now in an environment where there is significant variation in processor prices meaning that no price will ever apply to everyone.  This has not always been the case.

–          Milk pricing is extremely complex and there are too many variables for DA to confidently predict a single/universal price.”

It provides all the ingredients for a powerful argument against the proposed $2 million milk price index that seems to have gone very quiet.

On the other hand, Freshagenda is not the only one pointing to a softening in global dairy commodity prices. A quick Googling will reveal analysts from around the world coming to the same conclusion that this cycle is already turning. The processors all know it and can point to any amount of evidence for a lower new season’s price if they want.

Freshagenda has simply put that into context for Australians.

Yes, they’ve also put a number on it, or “numbers” I should say as they’ve actually offered a fairly broad price range that comes with the expected caveats regarding changing conditions.

When the dairy debacle of 2016 unfolded, it caught farmers by surprise. Many asked why they weren’t warned. We can’t have it both ways.

The question is: would you want to know if there’s a bad moon rising? At spreadsheet-time, yes, I would.

 

 

About the loss of MG

“We are stealing from the graves of our founding fathers and the cribs of our children,” were the words of former co-op chairman Ian MacAulay after the vote in favour of MG’s partial float was passed.

History has proven him right and it’s a travesty for our industry.

I’m not going to dwell here on how it feels because I’m sure that, by now, you’ve heard from plenty of others and my story is by no means unique.

All I can offer you is a list of questions for MG to help explain what comes next and the implications of the agreement it’s signed with Saputo. I’ve been assured they will respond but, understandably, it might take a little time.

WorkSafe update

A month ago today, MMM published a guest post from Marnie Williams, Executive Director, Health and Safety at WorkSafe Victoria regarding quad bike safety titled WorkSafe Vic to get tough on quad bikes.

At WorkSafe’s request, the blog post has been updated with changes to one of the paragraphs contributed by Ms Williams.

The paragraph initially read: “This means that if a quad bike is being used in a workplace – and there is a risk of rollover – the employer must fit the bike with an OPD”.

It has been updated with: “This means that if a quad bike is being used in a workplace – and there is a risk of rollover – the employer must consider fitting the bike with an OPD to eliminate or reduce the risk so far is reasonably practicable.”