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?

7 thoughts on “Disillusioned dairy

  1. Pingback: Rudderless Dairy – makes my heart bleed – Clover Hill Dairies Diary

  2. Farmers need to join a union. The current ADF structure is floored , so the real issues never get dealt with. On top of that ,there is no political will from any party for agriculture in Australia. Compitition policy, ACCC all work against the dairy industry and agricultural in general.

  3. This exploded on twitter & will say that not ourselves but others did get heated. Yet the people with ‘fake’ accounts in the dairy industry seem to find it ok to bully, blame, intimidate with false accusations. This is shameful behaviour. Behaviour that in our Industry has to stop. As pointed out in this article, some people, seem to think that they are more worthy, will be more accepted if they hide behind a fake name & bully others, will maybe further themselves in the dairy chain by slandering, defaming other dairy farmers with absolute false remarks. Enough is enough. Because with people like this in our Industry there is no hope ever for unity.

  4. I really have to agree with what john is putting forward here. He is not in anyway chastising the local grass roots volunteers and branch members from my reading. This is about the structures above those people and the leadership within those organizational structures and their dysfunctionality and lack of any real ability to work together in some coherent way. In other words any form of a real plan for this industry’s future both short and long term. John should be commended for saying what he has I find it a reasoned voice at a time of crises that can cut through the white noise this industry seems to generate and drowns in (shooting the messenger comes to mind). Our industry leaders have been unwilling to act and show leadership on how our industry should like and develop since the demise of Bonlac that was the real turning point. So the question is are farmers so tired and disillusioned they no longer care or are they desperate for their leaders to find their voice and start to talk to them on the issue that has to answered and resolved before we can once again be motivate to care and be involved

  5. So now we have to of the medium sized processor coming out with very early opening prices price why? Is this the first sign and fear that the rest of the industry has if a milk supply war breaks out between Saputo and Fontera for a limited and declining milk pool. Will it be as irrational as dollar milk and 80-cent cheese between the supermarkets?

    Sign on payments, production payments, and growth incentives ect are a cancer and will kill the industry if processors persist with these tactics to secure and grow their milk pools. They are morally wrong and an insult to all dairy farmers. In a single move with the use of the sigh on payment as the new weapon in their it seems ever expanding pricing armoury, they have now totally destroyed the ability of farmers to compare the milk payment systems and pricing of the various processors and understand what we are actually getting. This is nothing more than a reworking of the old practice of processors pricing against MG price plus 1cent.

    But now it’s being wrapped up and presented as a payment from the future if you decide to accept the offer, not one of competition for milk in that particular season. Our pricing structures are now starting to resemble electricity and phone contracts impossible to compare. 40 /50 cents over three years is about 1 cent a year for your loyalty. When will processors realize these types of practices will not buy and cannot buy you the farmer’s loyalty? When the exact opposite will happen, it will fuel continuing mistrust and resentment towards processors and accelerate it.
    This sign on payment is the biggest step backwards since the Flat milk incentives to the industries long-term viability. If you want farmers milk along with their loyalty just pay the best milk price you can and the same price no matter how big or small or what there supply curve is. The only difference on milk price between farmers should be milk quality and that’s all that should affect it.

    Will we now get a whole series of milk price add-ons to lure certain or specific farmers to each of the processors and who will be untimely paying the price for this competition? Farmers themselves will be we will once again be cross subsidising each other’s milk supply profiles. The money to play these games will have to come from somewhere so it’s going to come from farmer’s pockets. Creating inefficient and unsustainable farming practices long term. In affect distorting and stifling innovation and productivity improvements on farm.

    This pricing structure manipulation beyond just paying for milk solids and linking it to certain months where supposedly the milk is worth more for some reason is in reality a form of discriminatory market manipulation. That distorts the ability of farmers to farm to the farms specific regional and climate strengths to maximize the farms profitability and resilience

    Farmers once had a level playing field when it came to milk pricing the processors actions have removed that and taken that from farmers. Processors are now creating winners and losers with what’s happening with milk pricing and the cross subsidisation of milk supply profiles based solely on the timing of the farm supply curve. They have crated a pyramid scheme with money from the bottom of the pyramid flowing to the top. Accessing the milk price at the top of the pyramid is costly to the whole of the industry for very little to no reward. As is the case now that pyramid is being inverted with fewer and few farms there to support this pricing distortion which is the cause of the shrinking southern milk pool and farmers declining profitability. Sign on bonuses and all other incentives can now be seen as a form of price distortion. The more complexity the less clarity and transparency we will have with regard to milk pricing.

    Where did this base price of $5.50 KG/MS just come from? Have the processors arbitrarily just decided this as the new Bench mark now that MG is gone? So why is that the so-called incentives (Sign on / loyalty bonuses) above this or added to this price now seems to be 40 cents where did that come from. Why not a HIGHER kg /ms base price? Then the incentives and why the need for incentives at all they seem to be distractions from a real milk price. This is just making the milk pricing a joke just pulling numbers out of a hat or the old three-card trick. The higher the base commodity milk price the lower the value added component of the milk price will be so keep it low. So we ask ourselves why to justify the high cost short self-life daily fresh value add products they all make? When most of the processors are in the value add commodity sector

    If farmers are going to be cash flow positive and profitable at $5.50 KG/MS they cannot be forced in into high cost production systems. By default the current pricing models from processors are forcing them down this path to try and gain the highest possible milk price.

    Farmer’s indebtedness has risen markedly since 2008 when this push to devaluing spring milk started with the push to try and flatten the milk curve (which has not accrued, it in effect has shrunk the available milk pool) to gain so called factory efficiency. In tandem with that we have the climate change effect on the farms with shorter and more unreliable growing seasons.

    They now do not have the resources or the farm business flexibility to ride out the bad seasons or low milk price years and when they collide we get what we have now.

    Processors need to realize that the headline milk price is not what is important here but it’s all they seem to focus on the so called Holy Grail they all think we want. The processor wins because there’s is the highest milk price with a lot of chest thumping. The real issue is at what cost to the farmer and their business models the processes are forcing on farmers to achieve the holy grail of receiving the highest price. Ultimately that prize is unattainable just like the Grail and chasing it is destroying both farms and farmers along with the wider industry

    If processors want assurity of ongoing and consistent milk supply they and only they have it in their power to facilitate this. They need to start by restoring a level playing field between farmers with regards milk pricing so farmers no longer feel disfranchised

    It is now time for a voluntary code of practice for milk processors with these basic requirements that would go a long way to restoring the balance and trust of farmers.

    All processors must submit their opening milk pricing to dairy Australia. To be announced simultaneously to farmers.

    All processors must offer a 9/3 milk pricing in their payment offers Not more than a 30c kg/ms pricing differential between pricing structures offered to farmer suppliers

    No special prices or sign on bonuses of any type to attract certain supply types or to individual farmers

    So I respectfully ask and behalf of farms for the processors to start acting responsibly and with some integrity regarding what now happening. Because the words trust and respect seem to be the two words thrown about the most and that everyone wants to have ownership of and be associated with lets hope it happens for all our sakes. The question still to be answered in all that’s happened so far is where are the ADF and what are they thinking

  6. This problem has been around since deregulation, no leadership. Yes we are still hurting from the GFC as we had committed alot of money to capital improvements to find out all of sudden that paying them was going to be a struggle. The milk companies are still quoting global dairy prices but saying that competition should raise the price slightly. The next exodus IS about to happen. NO ONE CARES!

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