What’s wrong with welfare milk: back to 1992

The public tide of sympathy for dairy farmers has pushed the supermarkets to act again, this time, with “drought relief” milk. It’s the latest incarnation of what DIAA scholar Norman Repacholi rightly calls “welfare milk”.

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I cannot tell you how grateful I am to everyone who is pushing the supermarkets to do better. But this just can’t go on.

The so-called “drought relief” of 10 cents will reach few of us but all of us are affected by skyrocketing feed prices and need to pass some costs on. Only, we can’t.

Despite the special $3.30 for 3 litre milk that will be promoted for three months or so, most homebrand milk will remain priced at $1 per litre.

Those are 1992 prices. If milk had kept pace with inflation, it would today sell for $1.80 per litre.

Now, it’s true that fresh white milk sold through supermarkets does not account for a big percentage of the milk produced by most Victorian dairy farms. Some will tap their noses wisely and say that it doesn’t really matter a hell of a lot.

But it does, even to a farm like mine whose milk is turned into infant formula. It matters because it demonstrates perfectly how terribly captive Australian dairy farming is and how much reform is badly needed.

I can’t imagine any other Australian who would put up with all their blood, sweat and tears being discounted to 1992 prices. Yet we do, and that culture permeates the way prices are set for all of our milk.

It’s time to banish the begging bowls and get Australian dairy farming back on its feet.

Aldi refuses to lift milk prices

Following the commitment from Woolies and Coles to lift the price of some of its homebrand milk, Milk Maid Marian asked Aldi if it would follow suit. Here’s its response:

“In recent months, we have accepted price increases from a number of our processors to compensate farmers due to current market conditions.”

“Although the cost price we pay for milk has increased, at this point in time we do not intend on increasing retail prices for our customers.

“We support the findings of the recent ACCC Dairy Inquiry and agree with the recommendation to introduce a mandatory Code of Conduct.

“We remain committed to playing our role in contributing to the ongoing success of the dairy industry and a long term commitment to Australian farmers.”

Woolies, Coles move away from $1 milk but ignore the biggie: 60 cent cheese

Coles has followed Woolies’ move to increase the price of its 3 litre milk from $3 to $3.30 and both have promised they will donate the entire increase to farmers affected by drought.

I’m rapt that the supermarkets are finally doing something to loosen the screws. Farmers are suffering death by a thousand cuts and even this limited relief is certainly very welcome, particularly in NSW, Queensland and Western Australia, where most of the milk ends up in the supermarket fridge.

To everyone who has spoken up for farmers, thank you from the bottom of my heart.

But, and it’s a BIG but, at the risk of sounding like a whingeing farmer, there are three inconvenient truths that will continue to see farmers quit dairying:

  1. The drought is big trouble, yes, but there’s an exodus of dairy farmers (including those not hit by drought) because there’s simply not enough profit at the farm gate.
  2. The milk that goes into Colesworth’s $6 cheese is worth less than 60 cents per litre.
  3. Only about 13 per cent of the milk produced by Australian dairy farms ends up as fresh white milk on the supermarket shelf, even less in Victoria where most of the cows live! The biggest use for our milk is…cheese.

In other words, it’s like putting a band-aid over an ulcer. Better than nothing but you’re hardly going to save the patient.

In an interview with Milk Maid Marian, federal Agriculture and Water Resources Minister David Littleproud said he was open to applying a levy to other dairy products, such as cheese, so long as industry asked for one.

In a response to Milk Maid Marian’s question about cheese, Coles would only talk about milk and, at the time of posting, I had no response from Woolworths. Stiff cheddar, I guess!

Exclusive interview with Ag Minister: the code, the levy and a lack of leadership

In an interview with Milk Maid Marian, the federal Minister for Agriculture and Water Resources, David Littleproud, has made some extraordinary comments.

The Minister:

  1. is open to a levy on a range of dairy products (not just milk) if industry asks;
  2. believes a retail levy should be imposed until there is “market purity”, which means true competition for milk at the farmgate;
  3. says the supermarkets have a big role to play in the sustainability of Australia’s dairy industry;
  4. wants industry to come to him with ideas about how to halt the exodus of dairy farmers but says the ADF has not made any requests of him that would address farm profitability.

I hope the interview stimulates debate about how our industry has responded to the crisis over two years. Worth watching all the way to the end, so grab a cuppa.

 

 

Mandatory dairy code vote goes through

Sources have confirmed that a 7 to 6 vote in favour of a mandatory code was passed at Australian Dairy Farmers (ADF) this week.

The close result follows a campaign against the adoption of a mandatory code from the United Dairyfarmers of Victoria.

It’s a postion that appears to put the UDV in direct conflict with its own members, according to survey results presented by the ADF to a small group of farmers earlier this week.

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The UDV declined to comment on the vote result yesterday, referring Milk Maid Marian to the ADF, which has promised a response on Monday.

What’s stopping us?

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Photo by Pixabay on Pexels.com

Like an oozing sore on the ankle of Australian dairy, the frustration with the inaction of our national umbrella body has finally broken into an open wound.

Months after releasing its report into our woes, the ACCC has released a guide to the recommendations in an apparent attempt to build momentum.

Meanwhile, the federal agriculture minister, David Littleproud, has delivered dairy leaders an ultimatum backed up by a statement issued yesterday that includes this slap in the face for our representatives:

“The ACCC report into the sector identified market failure. I asked the dairy sector to come to a united position on a response to the report and a mandatory code of conduct for the dairy industry. This has not yet happened.”

Apparently, they have until tomorrow to be forthcoming, or else.

Yesterday, Minister Littleproud threw his support behind a 10 cent levy on milk to help farmers. Today, the new Prime Minister, Scott Morrison poured cold water on the idea.

Two years have passed. The silver lining to any crisis is change. We’ve seen none. Why? Who or what is stopping us?

 

Dear Prime Minister: practical farmers prepare

handheld tools hang on workbench

Time to get on the tools

Dear Prime Minister,

I know you’ve pledged to be practical about the drought. You know we farmers love everything practical.

Just as well. We know that if we didn’t maintain our gear, manage the land and look after our cows, stuff would be constantly breaking down. So, bothersome and costly as maintenance can be, we change the oil, repair the fences and attack the weeds.

Drought is little different: as you said, nobody can make it rain but, as bothersome and costly as preparation can be, we work really hard to prepare for its inevitable arrival.

We squirrel away feed and funds for the long dry spells, create microclimates with our Landcare brethren, and invest in the latest water-efficient technology, pastures and crops.

When El Nino unfolds and hangs on, we adjust both our herds and our bankers’ expectations, draw on those precious reserves, toughing it out until one of those thumping east coast lows heralds our salvation.

I was hoping you’d take a similar approach to drought and climate change. As bothersome and costly as action now on climate change might be, it’s our best bet to avoid these climate breakdowns becoming more and more regular.

Practical farmers prepare, Prime Minister. The climate needs a little TLC and you’re just the right man for the job.

 

 

 

Milk a microgrid

Copy of Chris Farm 9

There’s something interesting going on in the Latrobe Valley right now that I thought you ought to know about.

Local residents are being asked to sign up to a local energy feasibility study which, if it gets the go-ahead, will enable people with solar panels or wind turbines to sell any excess energy to others in their neighbourhood on their own terms – determining their own profits.

For dairy farmers, with lots of land and rooftops, it could provide another profitable income stream – not only saving energy costs but turning farms into profit-generating powerplants of the future.

To tell you more about it, here’s Belinda Kinkead, from the LO3 Energy team who are setting it up.

The Latrobe Valley project is such an exciting project for us because it is an opportunity for our technology to provide a significant and much-needed benefit to an entire industry.

We are working with Dairy Australia on this project and understand that reduced revenues are already making it hard to balance the books. We hear you.

Increasing running costs and greater weather unpredictability is only making it worse – and we were surprised to learn that, as a result, one in five dairy farmers are now preparing to quit.

But don’t quit just yet – because this could provide a way for you to turn things around.

It’s all about electricity.

You know better than me that dairy farming spends a lot of money on electricity. It’s used to run milking machines, pump water for irrigating fields, keeping milk chilled, heating water for cleaning equipment and providing light in the early morning hours.

And it’s expensive.

One case study showed a farm with 500 cows, 400 of which were milked twice daily, used 320 MWh of energy per year (875kWh per day). At an average cost of 25cents per kWh, that’s approximately $80,000 per annum[1].

But as farmers, you have extensive land and large areas of rooftops – perfect for solar panels or micro wind turbines.

Installing solar clearly has its benefits – it can reduce the amount of energy you have to buy from the grid, and any excess can be sold back to the grid.

Therein lies the problem. Right now, the only place to sell it is back to the grid, and it’s a closed market. There’s no price negotiation which means the return is usually in the retailers favour.

But, what if you could sell your unused energy to people in the local area – at a price they’re willing to pay? You reap the full benefit of the sale price of your energy.

For example (unless you were lucky enough to be an early solar uptaker) you would probably receive a feed in tariff of 10 – 15c/kWh[2] from your retailer. When you buy electricity from your retailer you would likely pay more than 35c/kWh at peak times, and more than 20c/kWh off-peak. That’s a significant gap.

There’s the prospect of a win-win where you can sell your excess generation to a neighbour for more than the feed in tariff, and they can buy electricity from you for less than the retail price. There are also other benefits associated with keeping your energy spend within your community – supporting local businesses and local jobs.

That’s the idea behind the Latrobe Valley Microgrid, a local energy market place.

It sounds complicated, but actually, it’s simple, and it’s proven – we’ve been running one in Brooklyn, New York for two years and the locals love it.

You might like to know that we have also partnered with SMF, and through the local councils, offer a financing option (Environmental Upgrade Agreement) that could ease your cashflow concerns for solar installations.

Everywhere in the world, technology and the sharing economy is changing business models – from Airbnb to Uber.

Adapting for the future is essential – and this really does make sense.

So if you’re looking to add additional revenue streams into your farm, take a look at what could be the solution. It’s all laid out on www.LatrobeValley.Energy

You can help make it a reality by taking part in the project. Join our feasibility study now. It doesn’t cost anything, we just need your consent to use your energy usage data on an anonymous basis to model the cost/benefits for the project. The more data we get, the more precise the results. Get online and register www.LatrobeValley.Energy.

[1] http://www.aginnovators.org/initiatives/energy/case-studies/energy-efficiency-supports-viability-family-run-dairy-near-wagga-wagga

[2] VIC minimum tariff for 2018/19 is currently 9.9c/kWh (https://www.energy.vic.gov.au/renewable-energy/victorian-feed-in-tariff)

WorkCover for dairy farmers: reality vs myth

Dairy farmers get injured. A lot. But how many of us think about workers compensation until there’s a serious incident?

I invited the author of “WorkCover that Works”, Mark Stipic, to bust some of the myths for dairy farmers. I highly recommend the book, which is packed with practical information yet easy to read, even after a long day in the paddock!

Thanks very much, Mark!

red myth circle

Recently, I had a conversation with Milk Maid Marian thanks to an introduction by our mutual colleague Kevin Jones from SafetyAtWorkBlog.

We discussed WorkCover in the context of the dairy industry. The more we talked, Marian discovered there could be many dairy farmers out there sharing some misconceptions about how WorkCover works.

Dairy farming is what I’d call a pretty high-risk industry. In Victoria the WorkCover Industry Rate for ‘Dairy Cattle Farming’ is 4.546% in 2018/19. This means many dairy farmers are paying more than 4.5% on top of their labour costs in WorkCover insurance alone. The average premium rate across all employers in the state is 1.272% so by comparison, you guys pay quite a lot.

Here are 5 common myths (and 5 harsh realities) about WorkCover in Victoria.

Myth 1: WorkCover is just another type of commercial insurance

The reality: WorkCover is more like taxation than insurance

First let’s compare WorkCover insurance to car insurance. When insuring your motor vehicle, you can browse the market, negotiate rates and compare the benefits of different policies. You can usually change insurers as often as you like. Once you have a reasonable claims history, you can request a lower rate or threaten to switch providers.

However, when it comes to WorkCover, each year the Victorian Government releases industry rates that are used to determine how much you’ll pay. Legislation determines your level of coverage. You cannot negotiate a better deal, not even through an insurance broker. Restrictions are in place that affect how often you can move your policy to another provider.

The WorkCover scheme is heavily regulated and WorkSafe Victoria has the authority to audit your business at any time. They even share information with the Australian Taxation Office and State Revenue Office to target employers who aren’t paying their fair share of WorkCover premiums. That’s all very different to other forms of insurance.

Myth 2: There are 5 WorkCover insurers in Victoria

The reality: There is only one insurer – WorkSafe

WorkSafe Victoria is the trading name of the Victorian WorkCover Authority. This is the state government agency responsible for OHS matters, employers’ WorkCover premiums, and claims for compensation by injured workers.

WorkSafe has appointed five agents to administer premium- and claims-related matters on their behalf. These are Allianz, CGU, Employers Mutual Limited (EML), Gallagher Bassett (GB) and Xchanging. These companies are often referred to as ‘the insurer’. But don’t be mistaken, they are not insurers. They are agents of WorkSafe.

When you pay your annual WorkCover premium, the money goes to the WorkSafe scheme, not to your WorkSafe agent. Even though the notices will display a logo from one of the five companies listed above, the agent is merely the administrator of the premium collection process. So be aware that, for WorkCover purposes, you are not dealing with an insurer per se, but with the third-party administrators of a state government agency.

Myth 3: I don’t need WorkCover insurance because I’m the only person working in my business

The reality: You don’t get to decide whether or not to take out a WorkCover insurance policy – either you’re required to have it, or you’re not eligible for cover

As I stated above, WorkCover is much like taxation. And you don’t get to decide whether or not to pay taxes – if you meet certain criteria, you must pay. Well, the same goes for WorkCover.

With regard WorkCover insurance, if WorkSafe finds out that you were uninsured for a period of time, they may audit you and sting you with back-payments and penalties.

So, if you’re the only person working in your business, how do you work out if you should have a policy or not?

Generally, if you are a sole trader or a partner in the business and have no other employees then you cannot take out a WorkCover insurance policy. This means you don’t have to pay, but it also means you aren’t covered in the event of an injury.

However, if you have a Pty Ltd company, you could be an employee of the company (even if you are the only employee and the business owner). In this case it is likely that your company should have a WorkCover policy. Regular payments made to you would need to be declared to WorkSafe and used in your premium calculation.

The best thing to do is contact one of the five WorkSafe agents and explain your business structure, including how you pay yourself. They will guide you through the policy registration process if appropriate or confirm you are ineligible for coverage.

Myth 4: WorkCover insurance will protect my business from the costs of an injury claim

The reality: Some employers will experience premium increases that significantly outweigh the actual amounts paid on the claim

If your business pays over $200,000 rateable remuneration (which is basically WorkSafe’s term for ‘labour costs’) then the costs paid on your WorkCover claims will be used in calculating your premium. If you have higher claims costs than the average for your industry, you can expect to payer higher than the average rate applied to your sector.

Having worked with hundreds of employers in many different industries I have observed that the system doesn’t treat every business fairly. Generally, small businesses in low risk industries (eg. A local real estate agency) will be well protected from the costs of a claim. For example, if an injured worker received $10,000 in WorkCover payments, the employer’s premium might go up a total of $1000 over the life of the claim.

But medium-to-large employers, especially those in higher risk industries, often experience premium increases that outweigh the actual costs paid on a claim. $10,000 paid to an injured worker could result in $40,000 additional premium over the life of the claim.

It’s difficult for me to explain the nuances of this risk in this relatively brief blog post. In the dairy industry I’ve found the tipping point is that if you pay more than $400,000 labour costs, you face a risk that a single WorkCover claim could lead to significant additional premiums to be paid. And that can decimate your bottom-line profits. You would be well advised to grab a copy of my book and pay close attention to the section on ‘sizing factor’ where I further unpack this topic.

Myth 5: I don’t need WorkCover for contractors

The reality: Some contractors are considered ‘deemed workers’ by WorkSafe. They attract additional premiums for your business, plus they could be eligible to lodge a claim against you

Generally, payments to employees are used to calculate how much WorkCover premium you’ll pay and payments to contractors don’t need to be declared.

While a person might be a genuine contractor for all intents and purposes regarding taxation and benefits, if they earn 80% or more of their income from a single source, they may be considered by WorkSafe to be a deemed worker. And payments to deemed workers are included in rateable remuneration (meaning they count towards your WorkCover premium).

There are many contractors out there who only provide contracting services to just one business. It is likely that the hiring business would be required to declare payments to this contractor as a deemed worker. If you engage contractors, you should brush up on WorkSafe’s guideline around contractors and workers.

Furthermore, WorkSafe has specific guidance around when a sharefarmer would be considered a worker or contractor. I understand this is a common working relationship in the dairy industry and you can read WorkSafe’s position on the topic here.

My advice to you

The dairy industry is an incredibly important part of the Australian economy and it’s my privilege to have been invited to share some helpful advice. Here are my top tips for dairy farmers:

  1. If you’ve made an error on your WorkCover policy – or perhaps you forgot to set one up when you went into business – sort it out sooner rather than later. The longer you leave it the bigger the problem could become. Plus, WorkSafe is generally more lenient when you self-disclose an error as opposed to when they discover it following an audit.
  2. Get to understand your WorkCover risk now and start taking steps to prevent injuries. Often it is cheaper, less time-consuming and more rewarding to proactively invest in injury-prevention strategies now than to deal with the fallout of a single claim.
  3. Don’t be afraid to seek independent advice. Most employers rely solely on their WorkSafe agent regarding claims strategies. But remember, they are an agent of WorkSafe. They must also provide advice to your injured worker and they may be working towards targets that don’t benefit the goals of your business.

About the author

Mark Stipic is #TheWorkCoverGuy and managing director of Mark Stipic Consulting. He is the author of WorkCover that Works, the only book of its kind written specifically to help employers reduce their injuries, claims and WorkCover premiums.

When you’re ready, here are two ways Mark can help you and your business take control of your WorkCover situation:

  1. Get a copy of his book WorkCover that Works. It will show you how to reduce your injuries, claims and WorkCover premiums.
  2. Request a free, no obligation 30-minute strategy call. Mark will help you address your most pressing challenges and connect you with potential solutions if appropriate.

ADF answers questions about the dairy code

Australia’s peak dairy representative body, Australian Dairy Farmers (ADF), has not yet joined the ACCC and all but one of the state dairy bodies in calling for a mandatory code that would govern the interactions between farmers and processors.

I’m grateful to ADF’s President, Terry Richardson, for answering four questions about the ADF’s approach for Milk Maid Marian.

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Terry Richardson, ADF president

1. Does the ADF accept the ACCC’s finding that the voluntary code was not effective enough?
TR: ADF accepts the ACCC findings that the current industry Code had a positive impact on contracting practices but has been unable to secure participation by all processors, reduce risk and strengthen bargaining power for farmers, independently arbitrate complaints or penalise breaches.

When the Code was introduced, it was agreed that a review would occur twelve months of operation. This included an assessment of its strengths and weaknesses in the context of the ACCC report and industry feedback.

We were aware at the start of the code review process that the next version of the industry Code must have such procedures in place.

It is important to recognise that prior to 1 July 2017, there was no Code of Practice for Contractual Arrangements in the dairy industry, and Australian Dairy Farmers was pivotal in making this difficult yet important first step.

2. If you are still committed to the review of the voluntary code, what resources does ADF have that were unavailable to the ACCC and may have hindered its review?
TR: It is incorrect to assume that the ADIC is conducting its own review with the aim of coming to a different conclusion to the ACCC. The ACCC and ADIC reviews have different objectives.

The ADIC review is focused entirely on how the voluntary code operated, what elements were successful and what needs improving in a new Code of Practice.

We found that relatively little of the ACCC report considered the operation of the current dairy industry Code of Practice despite the shortcomings.

Our concern with the ACCC report was that in recommending a mandatory code of practice, the ACCC did not conduct an assessment against the Australian Government’s threshold test nor did it provide adequate analysis on how this new code would operate.

It is our understanding that it is difficult to amend or alter a mandatory code once it is enacted if farmers determine at some future time that they are unhappy with its operation.

It has been incorrectly assumed that continuing with the ADIC review is an indication that the Council or ADF is opposed to a mandatory code of practice. That is not true.

The ACCC report broadly discussed the different types of codes but we need to review all options and communicate to farmers the benefits and shortcomings of each.

These are significant decisions for the dairy industry and farmers should expect that ADF forms a view that is underpinned by detailed analysis

3. What steps has the ADF taken in response to the ACCC report?
TR: ADF, in conjunction with the Australian Dairy Industry Council, is using the ACCC report as a springboard to revise and strengthen the Code of Practice and act on the other recommendations contained in the report.

We are working with a legal firm who has considerable experience in working with industry codes. While this legal advice is in its early stages, we will work through number of key amendments that should be included in a new dairy industry code, including a dispute resolution mechanism and penalties procedure that would ensure compliance.

We are also using the ACCC Guide to Industry Codes of Practice to ensure a strengthened code is consistent with best practice.

4. What are the next steps and their timeframes?
TR: The introduction of a Mandatory Code would take 15-18 months, and with a federal election scheduled for the first half of 2019, this timeline could be extended as government moves into caretaker mode during an election.

Preparing a strengthened industry Code including dispute resolution procedures is the next step, and we expect this to be complete in the next couple of months.

This work is complex and ADF is proceeding one step at a time, recognising the urgency of moving this work forward.

Thank you, Terry Richardson, for explaining ADF’s approach to a dairy code!