Author Archives: milkmaidmarian

About milkmaidmarian

Our family (me, my husband, little girl and boy) have a medium-sized farm in Gippsland, Victoria. Our farm is rain-fed rather than irrigated and has been in the family for generations. We love our farm and cows. We hope our blog, Milk Maid Marian We hope this blog helps other Aussies get a taste of life on the land.

Secret meeting the ultimate irony in quest for transparency and trust

BarnabyMG

Barnaby Joyce and Malcolm Turnbull meeting MG. Pic credit: The Guardian Australia

Tomorrow, Deputy Prime Minister Barnaby Joyce will bring the cream of the dairy community – from retailers and processors through to farmers – together in a symposium to discuss our futures.

It’s acknowledged there is much work to do in order to rebuild trust. One of the measures widely touted – including by Murray Goulburn itself after an earlier chastening at the hands of Minister Joyce and PM Turnbull – has been increased transparency.

Yet tomorrow’s meeting will be:

  • attended by a list of so-far-unknown representatives on an invitation-only basis and;
  • their discussion will be conducted in secret.

No wonder many average dairy farmers outside the inner circle feel excluded and frustrated.

I take my hat off to Barnaby for dragging all the parties together. But this pivotal meeting needs to be an open and honest discussion of what can be done to renew the confidence of Australian dairy farmers in our futures. And if there’s a bully in the room who demanded the doors be closed, it’s time that bully was called out.

Nobody in the Australian dairy supply chain has the right to hold the rest of us to ransom any more. The high moral ground has been well and truly lost.

There are fears that the dairy symposium will be yet another talk-fest over tea and cucumber sandwiches that achieves little other than the fulfillment of a political promise. I’m hoping it will be so much more. If Barnaby Joyce can hold Johnny Depp to account, anything is possible.

UPDATE:

Thank you very much to the Deputy PM’s office for providing this information:

The symposium will be held in Melbourne tomorrow. The Australian Bureau of Agricultural and Resource Economics and Sciences, Dairy Australia and the ACCC’s agriculture commissioner, Mick Keogh will all address the symposium, to be chaired by the Deputy Prime Minister Barnaby Joyce.

A spokeswoman for the Deputy Prime Minister said:

“We have invited key stakeholders from farmer organisations, processors and retailers to a dairy symposium to facilitate industry-led options to address the challenges facing the Australian dairy industry and discuss ways to improve the industry’s prospects going forward.

“The agenda will cover a number of topics including the outlook for the Australian dairy industry and options for improving milk price transparency, strengthening bargaining and restoring industry confidence.

 “The symposium is an opportunity to facilitate an industry-led discussion to better manage risk along the dairy supply chain, including managing the effects of world dairy prices.”

FURTHER UPDATE FROM AUGUST 25
Thanks again to the Deputy PM’s office for a list of RSVPs:

Farmer representative bodies
Australian Dairy Farmers
NSW Farmers
Dairy Connect
Queensland Dairyfarmers’ Organisation
South Australian Dairyfarmers’ Association
Tasmanian Farmers and Graziers Association
United Dairy Farmers of Victoria
Western Australia Farmers
National Farmers’ Federation
ACE Farming Company
Farmer, Willow Grove Gippsland
Farmer, Trafalgar Gippsland
Leppington Pastoral Company
Dairy Farmers Milk Co-operative
Farmer, QLD
Farmer, WA
Farmer, VIC
Farmer, VIC
Farmer, VIC
Farmer, QLD

Processors
Australian Dairy Products Federation
Australian Food and Grocery Council (AFGC)
Bega
Murray Goulburn
Fonterra
Bonlac Supplier Group
Saputo
Norco
Burra Foods
Lion
Parmalat
A2
Premium Milk
Richmond Dairies

Retailers
Coles
Woolworths
ALDI
Metcash

Other
Dairy Australia
Macalister Irrigation District Customer Consultative Committee
KAP President
Sinclair Wilson Accountants Warrnambool
Manning Valley Fresh Group, Taree Collective Bargaining Group NSW
Freedom Foods

Government
Deputy Prime Minister and Minister for Agriculture and Water Resources
Assistant Minister for Rural Health, Federal Member for Lyne
Federal Member for Forrest
Federal Member for Wannon
Senator for Victoria
Victorian Minister for Agriculture
Leader of the Nationals Victoria, Victorian Shadow Minister for Agriculture
Deputy Prime Minister’s Agriculture Industry Advisory Council

Officials
Australian Competition and Consumer Commission
Dairy Food Safety Victoria
Murray Darling Basin Authority
Campaspie Shire Council
Department of Agriculture and Water Resources
Department of Economic, Jobs, Transport and Resources

 

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Filed under Farm

Why I welcomed Four Corners to our dairy

I’m looking forward to watching Four Corners tonight with all the enthusiasm of a patient awaiting the lancing of a boil. Will it be fun? No. Will it be good for me? I guess so.

It’s almost four months since Murray Goulburn called a trading halt, followed by the infamous “clawbacks” of both MG and Fonterra that rocked the dairy community.

In a state of confusion and panic, farmers called out for help. Ordinary Australians did what they could, ditching cheap unbranded milk in a show of solidarity with farmers that continues to hearten.

Four months on, panic has given way to a sense of aimlessness and loss. Helou and Tracy’s vision had offered a shining path towards security and prosperity but now Gary the Great has vanished and nobody has filled the role of white knight. Leadership is lacking at the time we need it most.

We farmers have a fleeting once-in-a-lifetime chance to fix things. Politicians want to know how they can help but we don’t seem to be able to articulate a coherent answer other than to cry for something, anything, to dull the pain.

Meanwhile, there’s a puerile optimism amongst some elites, reckoning that every casualty improves the prospects of the survivors. It’s a sentiment that disgusts me and simply doesn’t stack up.

Floods of milk generated by the powerhouses of Europe, NZ and the USA sink or float the export market – not the farm next door. We’ve already lost thousands of Aussie dairy farmers since deregulation. More of the same won’t solve our problems.

The first step towards a cure is to work out exactly what ails us and, at the moment, all we’re doing is bandaiding a festering sore. If there’s anybody who can sniff out and lance a boil, it’s Four Corners.

That’s why we welcomed Deb Whitmont and her team to our farm. Sure, I’ll be cringing on the couch but Four Corners’ Milked Dry might just reveal the bitter pill we need to swallow.

 

 

 

 

 

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Filed under Farm, Fonterra, milk price, Murray Goulburn

Meet your MG board candidates

UPDATE 31/08/16: Congratulations to Lisa Dwyer, Craig Dwyer, Kelvin Jackson and Harper Kilpatrick for being elected to the MG board and to all the other candidates for putting their hands up.

Murray Goulburn farmer shareholders will soon vote to elect new members to the board of directors. The dairy processor accounts for a huge chunk of Australia’s milk and tends to set the benchmark for the milk price, so its performance is important to most farmers in the south-eastern states.

The candidates have been touring the country to introduce themselves but since only a small percentage of shareholders attend the meetings, Milk Maid Marian offered this post as an added platform to help MG farmers make an informed choice.

The candidates were invited to answer two questions in a video that is three minutes or less:

Q 1:  Tell us about you, how you farm and your roles outside the farm

Q 2:  What would you work to change at MG if elected and why?

Three of the candidates, Lisa Dwyer, Raelene Hanratty and Harper Kilpatrick sent in their videos. Here’s your chance to learn a little more about them!

Lisa Dwyer

Raelene Hanratty

Harper Kilpatrick

 

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Filed under Farm

Go home, Mother Nature, you’re drunk

WaterDryIn April and May, we were using the very last of our dam water in a desperate attempt to get grass out of the ground. Two weeks ago, we had floods and the cows missed two milkings, trapped on the flats despite valiant attempts to bring them home.

FloodJune22fjord

Then, just last week, we had snow.

SnowyHills

We even went up to the nearby hills so five-year-old Alex could see snow for the first time.

SnowAlex

It’s been a crazy year so far but I refuse to be cowed by mud.

mud

I’m celebrating the recharging of our dam for summer. It got very, very low but now is back.

DamSun

I’m also celebrating the snatch of spring we felt between the floods and the snow. With it came the magic of balloonists and their silks drifting across the river flats.

Most of all, it’s bringing the hope of a good season when we need it so desperately. War we can afford to buy in hundreds of tonnes of hay again this year. A failed season like last year would spell disaster in the jaws of a crushingly low milk price. To survive, we need to grow more grass than ever.

Landgate’s Pastures from Space tool confirms it’s been a difficult start to the year, with pasture growth rates actually even worse than last year’s failure. The thick red line represents an average year, the blue one is last year and the black one is the year to date.

PasturesFromSpacePGR

The outcome is even more stark when you look at the cumulative amount of feed grown. Again, red is average, blue is last year and black is this year. Last year the farm grew half the amount of grass it grows in an average year and this year sits below even that low water mark – so far.

PasturesFromSpaceTDM

As you can see from the two charts, things need to get better, fast. I’m really optimistic that we are seeing a turnaround.

Up until now, the rain we’ve had has been simply replenishing the parched subsoil rather than growing much grass. It needs to happen because unless the subsoil is moist, the root zone dries out in the warmth of Spring as soon as there’s any halt in rainfall.

So, how is the soil moisture looking? Check out these Australian Landscape Water Balance charts. The first one shows just how recently the soil moisture in the root zone has returned to normal. This means that, finally, the grass can grow if there’s enough sun, nutrients and warmth.

AWAProotzone

The good news is that while the subsoil is not as wet as the root zone, it’s returned to about average. The one to watch still is the deep soil moisture, which as you can see from the chart below, still has a way to go.

AWAPdeep

Mother Nature may be behaving like a drunk but, while it’s raining, I’m not complaining.

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Filed under Climate, Farm, milk price

Theo was too right…

keep-calm-let-s-cut-the-cake-and-eat-it

Here’s an unpalatable truth: when Fonterra head Theo Spierings said the milk price was unsustainable back in August last year, he was right. He also said the way milk prices are set needs to change. Correct again. Then he started talking about the need for, “a good debate with farmers … about how are we going to share – how are we going to cut the cake.”.  That’s what really matters right now.

At the time, Fonterra Australia head, Judith Swales responded to Milk Maid Marian’s request to clarify what Theo had meant by “sharing the cake” and said:

“We have always said that the best dairy industry model is the one where everyone can get a sustainable return. Farmers need to be able to make money, processors need to make money and so do customers, like retailers. And that’s what he means by sharing the cake.”

It’s hard to disagree with that sentiment. The problem is that we’ve learnt one more lesson in the last couple of months: if you’re stranded on a desert island with a hungry gorilla and a small cake, you’re in very big trouble indeed.

This post is not intended as an attack on Fonterra. After all, things are no better at Murray Goulburn. The reality is when there are thousands of small businesses selling a highly perishable product to a handful of large corporates and multinationals, the playing field is anything but even.

Just 12 months before Theo was talking about cake, the majority owner of Warrnambool Cheese and Butter, Lino Saputo, was quoted as wondering:

“…what will it take for the dairy farmers to be optimistic about the dairy industry and investing in their farms and what kinds of programs can we put in place that will assist them.”

At the time, I summarised my answer as “reliable profitability”. I posted the charts below showing just how far dairy farmers’ terms of trade had slipped and the wild fluctuations in profitability.

DairyTermsTrade

DairyBusinessProfit

“Productivity in the Australian Dairy Sector”, ABARES, September 2014

There’s one more factor I missed: confidence.

Writing for the latest edition of The Australian Dairyfarmer magazine, Dairy Australia managing director Ian Halliday notes that :

“In 2015, confidence among dairy farmers was at 75 per cent. In February this year, confidence had fallen to 65 per cent reflecting the dry seasonal conditions and also what milk prices were looking like for 2016-17 when considering the global price outlook.”

“Following the sudden milk price cuts in late April, which affected up to 65 per cent of all dairy farmers, we conducted another survey to get an understanding of changes in farmer confidence. This sample, although smaller, indicated confidence nationally had droppedd to 45 per cent.”

I’m willing to bet that confidence has fallen to historic lows after the Murray Goulburn opening price announcement.

What’s needed now is:

  • Transparency
  • Risk management strategies to deal with volatility
  • A more level playing field that provides farmers with real choices when dealing with processors.

These are the ingredients of reliable profitability and, without it, we’ll be continually wrestling the gorillas for the crumbs of a perpetually shrinking cake.

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Filed under Farm, Fonterra, Murray Goulburn

The haves and have nots of Australian dairy

CowTongue

I’ve had requests from farmers, investors, the media and even politicians for an explanation of how milk prices work (or don’t). I’m going to start with the factors that affect the price a dairy farmer in Australia’s south-eastern states receives.

  1. Who buys Old Macdonald’s milk?

The opening prices of most of the processors are in:

ACM $5.30
Bega $5.00
Lion (variable option) $5.00
NDP $5.00
Warrnambool Cheese & Butter $4.80
Fonterra $4.73
Longwarry $4.60
Burra Foods $4.40 to $4.60
Murray Goulburn $4.31
ADFC To be advised

It’s a massive spread of prices, with the top almost 25 per cent higher than the bottom. And it doesn’t stop there. The pricing systems are incredibly complex, with the prices no more than weighted averages. I know of a farmer supplying MG, for instance, who will receive just $3.79kg MS for his milk. I’ll explain that later in this post.

But, why, you ask, doesn’t Old Macdonald simply choose the buyer with the highest price?

It’s easy to change factories. You just call, make an appointment, fill in some forms and voila, a new sign hangs on the gate! But the reality is that there are lots of other factors in play:

  • Not all processors collect milk in every region. ACM, for example, does not collect milk from Milk Maid Marian’s district.
  • Many farmers are tied up with debts to their current processor or incentives for flat milk supply that would see them penalised tens of thousands of dollars for leaving.
  • Some farmers are contractually bound to the processor as part of share acquisition or “Next Gen” programs.
  • Then, there’s the waiting list. Processors tell me that since the opening prices were announced, there are hundreds of millions of litres of milk on waiting lists for new homes right now. The processors will cherry-pick those that suit their ideal profiles. In fact, many processors already have too much milk and have simply closed their books.

2. The breed of cows and what they’re fed
As a rule of thumb, if you’re not familiar with this industry pricing, you can convert prices expressed in kilograms of milk solids (kg MS) into cents per litre (cpl) by dividing by 13. So, $5.30 per kg of milk solids equates to 41 cents per litre and $4.31 equates to 33 cents.

It’s a formula that works pretty well for the 80% of Australian dairy cows that are the classic black-and-white Holsteins.

But not if your cows are Jerseys. Around 11% of Australian dairy cows are Jerseys, which produce around 30% less milk than Holstein Friesians but a lot more fat for every litre. According to ADHIS statistics, HF cows’ milk contains an average 3.83% butterfat and 3.24% protein, while Jersey milk is creamier at 4.76 % fat and 3.67 % protein. This means that returns from Jerseys appear higher than those of HF in terms of cpl and lower in terms of dollars per kg MS.

3. When the cows give the most milk
Every cow produces no milk for two months until she calves, then her milk production increases steeply for a couple of months before tapering off again. We call this her “lactation curve” and when you add together all the herd members’ curves, you get a farm’s “milk supply curve”.

It makes sense to have the herd’s milk production peak when there is the most grass in the paddocks. Inevitably, that’s in Spring. Of course, if all herds peaked in Spring, it would cause big trouble for the processors. The entire Australian dairy milk supply is getting less and less seasonal over time because the processors offer more money for “off peak” milk.

Here’s an excerpt from my own farm’s income estimate to show you just how much the price changes over the year with Fonterra.

FonterraTotal

For MG suppliers, the shift can be far more dramatic if suppliers elect to provide “flat milk” but I would need to dedicate a blog post to explaining this aspect of its system.

The differences in payment systems mean that even if a farm receives the average milk price from one processor, it might not from another.

4. Compulsory charges and levies
Most processors have compulsory charges that come off the headline price. These are not trivial and amount to tens of thousands of dollars. In my farm’s case, we pay a transport levy that amounts to 35 cents for every kilogram of milk solids we sell. On top of these, there are Dairy Australia and Dairy Food Safety Victoria levies.

5. Bonuses for the big and beautiful
If you think you’re across all that, don’t forget there are productivity incentives that favour larger farms and MG still has a growth incentive for farms supplying more milk than the year before. These can be very significant. There are also quality bonuses (and/or penalties) with different processors having different benchmarks.

6. Clawbacks
As you might already know, both MG and Fonterra dramatically dropped their prices for May and June to bring back the overall price. They have both come up with “support packages” for suppliers. Farmers are now beginning to pay for those. Fonterra suppliers are on interest-only this year and principal repayments will begin in the next financial year. MG suppliers are paying off their packages in the form of an artificially-lowered milk price already.

7. Special deals
Farmers were outraged back in 2012 when it was revealed that even the co-op was offering special deals for the really big farms. Nobody can say for sure how common these are today.

The bottom line is that every farmer needs to get an individual income estimate from processors to be sure what their milk price really is and what it would be if they supplied a different factory. Not all milk is created equal.

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Filed under Cows, Farm, Fonterra, milk price, Murray Goulburn

Which dairy farmers will survive?

Damocles

The Sword of Damocles. Pic credit: Moritz Aust

I was digging a post hole today when my phone binged a message in my pocket. And binged again and again and again and again.

I paused to check the messages, still with the post hole digger under my shoulder and stared in shock at the Murray Goulburn announcement.

As the biggest milk processor, MG tends to set the benchmark price and, in the new financial year, it will be $4.31 per kilogram of milk solids or about 33 cents per litre. After you take off the compulsory fees the processor charges for milk collection, it’s around 30 cents. Even less again for the many Gippsland farmers whose cows calve in Spring in line with Mother Nature.

It costs a farmer like me about:

  • 40 cents to produce a litre of milk when the season is good and nothing goes bust and the bank is happy with interest-only; or
  • 42 cents to make milk and maintain the farm; or
  • 45 cents to breathe and grow.

On top of the drought we’ve just endured, this fresh set of bad news will finish many farmers off. Not just the inefficient producers, either. Far from it.

Those coasting along with little debt will emerge at the end of the year with the fewest scars. In fact, it will be the youngest, most ambitious farmers who heeded the calls for growth from Murray Goulburn, Fonterra and the banks just 18 months earlier and invested accordingly who are the most vulnerable.

We stand to lose the innovators, the future leaders of our industry. They are also those who were in line to buy the properties of retiring farmers.

I am not a Murray Goulburn supplier but the opening price announcement left me reeling. The phone rang. In a daze I answered it but found I simply could not speak.

Words fail me and with Fonterra yet to announce the price it will pay us for our own milk, the sword of Damocles hangs low. Fonterra’s behaviour over the last few weeks has been inconceivable. Will it be able to rebuild any trust tomorrow?

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Filed under Farm, Fonterra, milk price, Murray Goulburn