Protecting farmers from ourselves

Apparently farmers cannot be trusted with anything. Not even to want the highest farm gate milk price for ourselves.

Bega has just sold its stake in Warrnambool Cheese & Butter to Saputo, putting the Canadian billionaire on the brink of controlling WCB even though a higher price was on offer from Aussie farmer co-op, MG.

This happened because our co-op hasn’t been allowed to bid during the bidding period.

Australian farmers who want to invest in their own futures and who are willing to pay the highest price for WCB have been stymied by a government artifice in the name of protecting…you guessed it…farmers from themselves. Apparently, another processor that thrives on a low farmgate milk price is better for us farmers than having an efficient farmer-owned co-op.

This Aussie dairy farmer will never forgive Joe Hockey for sitting by and watching.

So, where to now? That, my fellow source of low-cost milk, is up to us, for although Saputo can buy WCB’s stainless steel, it cannot buy our future. Only Australia’s dairy farmers decide where our milk flows and our fortunes lie.

13 Comments

Filed under Community, Farm, Warrnambool Cheese and Butter

13 responses to “Protecting farmers from ourselves

  1. John

    MG only have to send its milk tankers on a Warrnambool run and things will get interesting. Farmers will have all that Canadian money in their pockets too!

    By the way, don’t blame Jo Hockey for not interfering in the appeals process on behalf of MG.. We might find fault with the process, but we don’t want government ministers interfering in those processes just because the interference might suit us. Such interference would be corruption. I’m sure you wouldn’t want to foster that in this country?

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    • Good point, John, but we do need our politicians to structure the “system” so that everyone gets an equal chance. We should not be penalised simply for being Australian.

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    • Only me

      MG doing a consistent milk run to Warrnambool is highly on the cards but lets not forget round one is not over until COB Wednesday 22nd Jan. Round two will start soon after and be surprised at what unfolds in that round. The three parts to round two will be of equal importance to that of round one.

      Also as for ministerial intervention, that is both a right and a duty of a minister at any point where the ministers considers the policy framework for one of their portfolio members has failed the community. ADM with Graincorp is but one example. In this case the Takeover Panel could be considered to have failed in its duty of care by not preventing Saputo from continuing to acquire whilst MG was prevented – unfair practises perhaps. On this one it would be up to MG to pursue a legal challenge if it felt it was worth while.

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      • Nigel Hicks

        Or they could face the reality that those that don’t already supply MG would do anything not to have to supply them including some of their existing suppliers tied by finance obligations

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  2. Nigel Hicks

    Until we can move on from the misconception that MG is a truly farmer controlled co-op that pays a price better than other companies we will continue to suffer unsustainable milk prices.
    As much as I don’t support foreign ownership of our industry if MG was able to take ownership of WCB as a step in its quest to be the super co-op of Australia controlling the industry in a manner similar to Fonterra in NZ would have a far more disastrous effect on farm gate price than the acquisition by Saputo.
    Mg has consistently paid a milk price below its competitors since around 2005 and that is before deducting the compulsory share deductions to further reduce the true return to the farmer.
    The only way to protect the Australian family farm and the nations food security is to support the group already working towards setting up a farmer owned National Milk Pool to control the “supply” element of our industry to ensure competition for that supply and to command a truly sustainable milk price. None of the current processors including MG will strive to achieve this as their primary objective. As directors the companies are legally bound to put the company profit ahead of milk return and that in the current system is the easiest way to ensure profitability at the farmers expense.
    The safeguards of the ACCC in this case I believe are in the best interests of the industry to prevent MG moving towards a monopoly of supply which would have a devastating effect on farm gate price. We have seen the effect of the supermarket duopoly

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    • Only me

      The MG/Fonterra/Saputo struggle is a greater power play that just that.

      Milk pool – Can someone explain what they think this means and how it would work?

      Company Directors comment is complete nonsense.

      Retail duopoly is a media expression that bears not relevance to reality.

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      • Nigel Hicks

        Milk Pool = basically a single desk whereby processors purchase milk from the pool and not directly from the farmers.
        Company Directors= the directors of any entity have a legal obligation to ensure it is managed correctly.
        Retail Duopoly I agree is a media term and really should include anyone post farm gate

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  3. Daniel

    Sad. I suppose MG can still hope that Saputo pays top $ for the assets but can’t generate a decent return on investment and bails out in a few years with MG as a willing buyer at a saner price with the competition approval process effectively already having been played out.
    There are no real other acquisition strategies for MG to exploit in Australia but the timing of this whole saga was forced on them. They’ll have other ideas to increase the milk price.

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    • Only me

      The risk is that Saputo has had to pay such a premium for WCB it will need to do two things to keep its own Canadian shareholders happy.

      1. Keep costs as low as possible meaning drive factory automation, reduce employees and ensure as low as possible input costs, including milk. It will change the production mix of the plant to high yield products for the export market – milk powder in Asia. This will deny local product supply and also puts Lion’s cheese agreement at risk.

      2. Keep the share price of WCB high, typically near or above its acquisition price and ensure its credit rating stays high so not to incur and increased cost of debt.

      Neither of these bode well for Australian dairy farmers in that region.

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      • Nigel Hicks

        The issues facing the Australian Dairy industry go far wider than that region and are on a National scale. Until we address this the industry will continue to decline

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  4. Daniel

    It’s it funny that Fonterra collects approximately two-thirds of Tasmania’s milk production (http://www.intodairy.com.au/index.php/milk-companies/fonterra [last sentence, paragraph 3] yet it can acquire Tamar Valley with no questions asked about competition for milk supply.

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    • Only me

      Some points to consider:
      1. Tasmania is well served domestically for fresh produce but even this is largely controlled by offshore interests outside of Australia or New Zealand.
      2. Without Fonterra Group Tasmania would be totally dominated by offshore interests outside of Australian and New Zealand.
      3. There is a very special FTA agreement between Australia and New Zealand that affords both countries greater interchange of business and trade that Australia does not have with any other country in the world. Besides the acquisition limit of just over $1bn which is shared with the USA it is unique in that it allows Australian export products access to overseas markets that cannot be achieved directly from Australia. New Zealand’s gift to Australia, through Fonterra Group and without this milk would potentially get washed into the sea and drive farmer and herd levels down.
      4. Tamar Dairy was a small but important operator in the region. VDL is of greater concern. As you all know, both of these are up in the north western corner of Tasmania. You all pray VDL is retained by an Australian or New Zealand company as it is about to become an acquisition of greater interest in the media and is currently owned by a New Zealand company as it is.
      5. Murray Goulburn and Fonterra are Tasmania’s largest processors of extended shelf life processing products (UHT, Powders, Whey and Casein) and without them Tasmania would be in a tough position.

      Sometimes it is best not to bite the hand that feeds you.

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      • Nigel hicks

        Lack of sustainable prices for milk supply should make us all question what is going on. Processors continue to grow at the expense of the family farm, but then perhaps that is the long term plan. Get rid of all of those annoying individuals and replace them with their own corporate run entities controlling profits from paddock to plate

        Like

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