Category Archives: Community

Code of conduct vs contracts

CoC

The newly released Code of Practice has been promoted as industry working together to restore trust and confidence. It’s a step in the right direction but, as it stands, the Code brings little comfort for three reasons:

  1. Apart from a few tweaks around the edges, it preserves the status quo;
  2. Other than being labelled “very naughty”, there are no penalties for flaunting it; and
  3. It doesn’t apply anyway when processors demand new suppliers sign an individual contract. Easy!

Welcome improvements achieved by the code
Don’t get me wrong: the tweaks achieved by the code are welcome and important, especially these:

  • “Any downward changes to such adjustments (or adjustment calculations) cannot be made unless the dairy farmer has been given 30 days’ written notice…”
    In the heat of May 2016, Fonterra initially gave us minus 5 days’ notice. Thirty days would have allowed farmers to make better decisions under far less pressure.
  • “A farmer is entitled to all accrued loyalty and other payments where they have supplied to the end of a contract term, irrespective of whether they remain a supplier post a contract expiry.”
    This will make a difference because, while it effectively continues to reinforce at least a one-year term, farmers are free to switch processors afterwards without missing out on payments that could otherwise take months to arrive.
  • “Where a farmer has a contract with a processor and wishes to expand their production and a processor does not want to purchase the additional milk under the same contractual terms and conditions, the contract between the farmer and processor must allow the dairy farmer to supply the additional milk to other processors.
    This clause will apply if the primary processor is prepared to take milk in addition to the contracted volume at a lower price.”
    This aims to prevent the dreadful Tier 1 vs Tier 2 milk situation seen in fresh milk states like NSW for those on standard form contracts.

Sadly, none of this will stop a savage price drop again and farmers are still pretty much forced to sell all their milk to a single customer for a full year without any guarantee of the price they will be paid.

It’s sad but true that, even with the improvements made by the Code, dairy farmers are at a horrendously unfair disadvantage to the processors who buy our milk.

A Code with no bite
The first thing I should say is that it is clearly not within the power of dairy farmer representatives to mandate this Code. Only our politicians can make laws.

It does mean, though, the that Code is something of a toothless, arthritic tabby at best. In fact, the worst that can happen to any processor who breaches the code is that suppliers can leave (if they can find new homes for their milk) and the processor is labelled a very naughty boy.

Frankly, the shameless behaviour on display over the past 18 months shows it’s pretty clear plenty of processors don’t give a damn what we think of them.

In a piece published by the Stock & Land, UDV President Adam Jenkins said:

“But it’s up to us, as dairy farmers, to take ownership and hold the processors to honouring all the provisions.”

Sounds great. Unfortunately, we just don’t have the power to do that. After all, that’s why a Code was developed in the first place!

Code vs contracts
The Code only applies to “standard form contracts” (those which are the same or similar for all suppliers) rather than the increasingly-common individual contracts.

Burra Foods CEO Grant Crothers spells it out neatly for suppliers in his June 27 blog post:

Mr Crothers is on record now saying that his contracts comply with the Code. I’m not a lawyer, so I can’t comment on whether the clause below contravenes the Code’s insistence that “…no changes should ever be made retrospectively…” but can well understand why some dairy farmers are concerned it does.

Burra42.jpg

At any rate, simply moving from standard form to individual contracts provides an easy work around for processors not keen on meeting the terms of the Code.

The Code provides a starting point
While the Code is not the solution to all our woes, at least we now have a list of basic expectations regarding the way processors treat farmers. But I couldn’t put it better than Adam Jenkins himself, when he wrote: “…while the code is in itself a great achievement of the dairy industry, the real challenge will be ensuring that it is enforced”.

The Code is a foundation for other measures that will restore confidence to invest. Let’s hope there’s another few rounds in the locker to come.

 

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Dairy Australia directors need to roll up their sleeves

daemail

It’s sad to say but, clearly, Dairy Australia is scared of farmers.

I returned from a few hours in the paddocks to find screens and screens full of comments on Twitter from fellow farmers on the leaked DA email above.

It’s been explosive because DA is accused of protecting its own turf first rather than being transparent with and accountable to the farmers it serves and who pay compulsory levies to fund its operation.

Contrary to Barnaby Joyce’s wishful pronouncements, farmers are still in a world of pain and the DA levies amount to tens of thousands of dollars per year for many of us. It’s no surprise then, that the way DA spends farmer funds is highly scrutinised.

I’m a believer in the work DA does. The knowledge I’ve gained from DA programs has made an enormous difference to our farm and we’d be a lot worse off without it. But not everyone agrees.

Some farmers are even pushing hard for a halt to the DA levy, irate that the opportunity for a routine poll on whether the levy should be maintained, changed or scrapped altogether was passed up by a committee.

That committee had farmer members and the DA board has farmer members, too. You might think that something run by farmers for farmers would be great at communicating with farmers, but it’s not.

I’m embarrassed to say that, until I Googled them, I couldn’t even recall the names of DA’s long-standing farmer directors. And there are only one or two visible DA HQ staffers on Twitter. While DA maintains its silence, it’s hard to understand how it can accuse upset farmers of spreading misinformation.

It’s time DA’s farmer directors rolled up their shirt sleeves and had frank conversations right from the start. There was a time we had a director on Twitter who knew how to take the sting out of almost any issue by being ready to chat, quick to crack a joke and unfailingly real.

DA can never control the message but, if it wants farmer respect and understanding, it must first join the conversation.

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Dairy love and why it’s lacking on St Valentine’s

“Imagine you decided to stay and defend your home from a bushfire, while your neighbour flees.”

“You save your home but the mental scars are deep.”

“Your neighbour’s place is burnt to the ground and sympathy floods in for the family and, in time, they move into a beautiful new home.”

This was the scenario clinical psychologist Rob Gordon put to me explaining why rifts often open in any community after a disaster. He pointed out that because everyone’s experience of a disaster is different, misunderstanding and resentment brew under the pressure of recovery.

I’ve seen it in dairy social media forums. While thousands of farmers are finding ways to support each other on forums like the Show Some Dairy Love Facebook page, there are some cranksters out there who need to kick heads.

I’ve felt the heat of that anger first-hand, ironically from a non-farmer, who says I was one of those with a secretive “special deal” shielded from the infamous claw-back, accusing me of having no morals.

The truth is that, in May 2015, I had chosen to sign up for one of Fonterra’s “risk management products” available to all suppliers. It meant the price for 70 per cent of our milk during the 15/16 financial year bobbed about in a range with upper and lower limits.

Sure, we would have missed out badly if prices did get to MG’s much-vaunted $6.05kgMS forecast close but it felt like good insurance.

When Fonterra cut its price in May 2016, the price for 70 per cent of our milk dropped to its floor. The remaining 30 per cent tumbled the whole way down.

Lots of people were much worse off than we were. Others were much better off.

That’s the thing. Just like a bushfire, the milk crisis has affected everyone differently. So many factors come into play, like:

  • the size of your farm,
  • the time of year your cows calve,
  • which processor your farm supplies,
  • whether you have/had a contract, and
  • which stage your business is at.

On top of all this, there is loyalty and trust.

Hundreds of farmers swapped processors for the first time in years or decades. For many, it was a matter of survival. Others have not been able to switch and some consider leaving the last big co-op nothing short of treacherous desertion.

Add to all this that farmers have now been battling to pay bills for 10 months (actually, a lot longer if you were in one of the drought-affected regions) and it’s not surprising that people are feeling rather cranky, to say the least.

To make matters worse, change for the better seems an aeon away. The senate, ACCC and ASIC inquiries have revealed little to date, other than that the unrepentant Helou had not been interrogated.

I’m spending St Valentine’s Day at the Gippsland ACCC farmers’ forum. I hope that out of this comes a bit of the dairy love we all need.

 

 

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Farmers finally get our chance

accc

A once in a lifetime opportunity to sort out the whole damn dairy mess we’ve all taken for granted for so long is coming to town. The ACCC wants to meet you, dear dairy farmer. Not the men in suits – you. If you can’t get to one of the forums or find the time to write an email, that’s okay because they’ll even take calls from the tractor cab on 03 9290 1997. Just do it.

Why? After last year’s debacle, we shouted from the rooftops that the system stank. For once, people listened. Average Aussies dug deeper at the supermarket to help us. And, now, the regulator is asking us exactly what the problem is and what needs to change. We can’t fall silent now. Would anyone ever take us seriously again?

We deserve a system where:

  • the risk in the supply chain is shared fairly by processors and farmers;
  • the farmer is free to sell his or her milk based purely on its virtues on an open market;
  • processors act independently of their competitors;
  • there is trust and transparency in all dealings; and
  • farms big and small are treated fairly.

This stuff is pretty basic in other industries and it’s far bigger than the behaviour of MG and Fonterra (the regulator is looking into that separately). It’s about the way the entire dairy sector ticks and how we are paid for our milk.

It may just be the closest we will get to spelling out and solving the problems that ruined lives. Don’t let others decide our futures. This time, the ACCC means business  but it needs your input.

The ACCC dairy forums will be held at:

  • Monday 6 February 2017 – Toowoomba, Qld
  • Tuesday 7 February 2017, 12pm–2pm – Club West, Taree, NSW
  • Tuesday 14 February 2017– Traralgon, Vic
  • Monday 27 February 2017 – Warrnambool, Vic
  • Tuesday 28 February 2017 – Shepparton, Vic
  • Thursday 16 March 2017 – Bunbury, WA
  • Monday 20 March 2017 – Hahndorf, SA
  • Wednesday 22 March 2017 – Burnie, Tas

Go if you can, email dairyinquiry@accc.gov.au or call 03 9290 1997 and ask for Amy Bellhouse. All the details are at the ACCC dairy inquiry website.

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We’re all in this together

SilkyOak.jpg

“We’re all in this together” was the message on the invitation. How true.

So, on Saturday night, around 200 locals enjoyed a “Night on the Green” sponsored by the UDV. As the kids romped on jumping castles or chased each other with balloon swords, the grown-ups took the chance to unwind and regroup after a torrid 18 months. And it didn’t matter where you send your milk.

Among the farmers at the Night on the Green were Paul and Lisa Mumford, who just days earlier had opened their farm, their books and their hearts to visitors. The pair are well-respected and volunteering to make their business a Focus Farm brings a level of scrutiny most would find daunting: everything is on show, right down to their most revealing financials.

The husband and wife team were in equal parts honest, humble and inspiring as they answered questions about their aspirations and challenges. We’ll all learn a lot from Paul and Lisa because they’re so generous with their knowledge.

And, on Sunday, a group of about 10 local Landcarer friends spent a morning doing something for one of our own. Kaye is my Landcare heroine. For years now, she has been the backbone of our group, giving away thousands of trees and coordinating our mob of volunteers to great effect. A long bout of illness meant Kaye’s magnificent garden needed a tidy up. What an opportunity to show her we cared!

This is what community is all about. We’re all in this together! Merry Christmas!

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What MG’s announcement means in plain English

This is a post written purely for my fellow dairy farmers in light of the MG announcement today. After speaking with the people at MG, this is what I have learnt:

Why the price must fall
MG opened at $5.60/kgMS. Its lower than expected sales, the rising Australian dollar and the fall in the value of its larger than normal (which are routinely high anyway) inventories mean it has a shortfall of between $170 and $200 million. This means the price paid to farmers must fall.

How far the price must fall
Depending on how the last two months of this financial year pan out in terms of sales and exchange rates, Murray Goulburn will finish the season between $4.75 and $5.00.

But the price can’t fall that far in two months…
To do that, it would need to pay farmers virtually nothing for milk supplied in May and June. Some rough numbers sent to me by an industry analyst puts those figures at about 4.75 cents per litre. Clearly, that would be disastrous for many suppliers. It would also cripple MG because farmers would have little choice but to leave MG and supply any other processor that would take their milk.

…so, here’s what will happen
MG will pay farmers for milk supplied in May and June as if the price was $5.47 all along. In other words, the price for May milk will be $3.38 for fat and $7.42 for protein. For June’s milk, it will be $3.45 for fat and $7.59 for protein.

If MG’s sales and the currency fall in line with the worst case scenario and MG really should have paid farmers just $4.75 for the year, it will mean there is a shortfall of 47 cents for every kilogram of fat and $1.03 for every kilogram of protein.

This money will be deducted from the price paid to farmers evenly over the next three years. It means the milk price will be lower for each of the next three years than it otherwise would have been by about 15 cents for fat and 34 cents for protein.

But it’s NOT a debt carried by individual farmers
The money to be deducted over the next three years will simply come out of the milk price. If a farmer leaves MG and moves to a different supplier during the next three years, no debt will follow that farmer. If a farmer joins MG in the next three years, that farmer will have a lower milk price than they would have received in a normal year.

MG will not apply a loan against an individual supplier and will not respectively apply terms and conditions to suppliers.

About this post and me:
I am a former MG supplier who still holds some MG shares and currently supply Fonterra Australia. This post is not designed to do anything other than clarify confusion surrounding the situation because I am fearful for the mental health of my fellow farmers. This post has been checked by MG for accuracy.

 

 

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What does dry mean to you?

 

WarMem

Watching the sun rise behind the War Memorial yesterday, I had a sudden realisation: there is no drought on the St Kilda Road boulevard.

For one of the few times since our children were babies, I was on my own in the city, gazing dreamily at the traffic, trams and people below the hotel balcony.

It occurred to me that if you were one of the people whose lives pulse with the number 8 tram from the heart of the city to leafy Toorak and back every day, you’d never know it was dry. You might catch Landline and wonder what all the cockies were whinging about this time.

Unless you were a gardener, of course. Or the volunteer caretaker of the local sports ground. Or a bushwalker. Or, even, a concrete cowboy with a weekender on the Peninsula. Maybe you just had childhood holidays on an uncle’s farm that left you with a deep-rooted, almost subconscious, connection.

Actually, I realised, there are probably a lot of you speeding by down there who know and who care. I saw it in the comments following my plea for the CSIRO in The Guardian. There were so many who saw the same threats and shared the same hopes.

Others wondered aloud whether farmers were to blame for their own demise by voting for the National Party. I’m not sure but I suspect so many farmers do because we fear being forgotten in the city.

Perhaps it’s time we stopped emphasising the differences between city and country. I promise to work harder to weave my writing with threads common to us all.

 

 

 

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