GAMP: Before MG in Gippsland

With just a couple of exceptions, the processors seem to have learned just one thing from the last year of chaos: loyalty is now a luxury item.

The jumble of opening prices, incentives, secret deals and long-term contracts with short-term prices shows that, by and large, we are in an era where it’s every man, woman and child for themselves.

It wasn’t always this way. Until recently, you could not buy loyalty.

Even though there were more lucrative options, most Australian dairy farmers chose to supply the last big co-op, Murray Goulburn. For generation after generation, we knew in our hearts that only a strong co-op, which put farmers first, should set the pace for the farmgate milk price.

Since the April/May debacle when farm gate milk prices crashed to disastrous levels, farmer loyalty has become gossamer thin. The main theme from Dairy Australia’s farmer survey reported in its June Situation & Outlook was that “Trust in processors has taken a knock”. Err, yes, just a little.

“In the past 12 months, 11% of respondents changed the processor they supply and a further 17% would like to change supplier – 9% are considering it and 8% would like to change but are unable to.”

“Farms with herds greater than 700 cows were most likely to have changed processor or to be considering a change.

“In general however, most farmers tend to be loyal to their processors historically and 61% have remained with one processor for the past 10 years.

“Milk price is predictably the primary reason for changing or considering changing processor, however 21% also expressed concerns with processor management and the treatment of farmers, 12% were concerned about the ‘clawback’ and 8% lack trust in their company and feel they have not been honest.”
– p. 5, Dairy Australia Situation & Outlook, June 2017

DA’s survey was conducted in February and March – well before MG opened first, very early. Everyone was watching. For years now, MG has set the benchmark milk price, pushing it as high as it could go in the spirit of a farmer-owned co-op.

This time was different.

MG’s price of $4.70 per kg of milk solids (about 36 cents per litre) was simply far, far too low. MG’s competitors needed milk and were willing to pay not just a little more but a lot more and farmers have been scrambling for the life boats in a bid to survive a third tough year in a row.

Meanwhile, other processors have been offering “loyalty” bonuses or locking farmers into long-term supply contracts without the long-term prices to match. It all flies in the face of the honour, transparency and simplicity the processors are apparently set to pledge under the Code of Conduct.

Today, MG has performed a minor miracle, lifting its opening price from the miserable $4.70 to $5.20 before the season has even begun. This 11 per cent increase puts the MG price close to breakeven for many of its suppliers.

Farming families across the country will breathe a little easier tonight and, for that, I am very grateful.

But, like the “forgiveness” of the MSSP, like Fonterra’s 40 cent payment, this about-face leaves me wondering why it was necessary to inflict so much pain and hardship on farmers in the first place.

Bitterness is never a becoming attribute but, with processors pulling one stunt after another seemingly without regard for the farmers stretched to their financial, physical and mental limits, it’s getting harder and harder to maintain the faith.