Category Archives: Dairy Products

Who deserves the cream of Australian dairy?

“When we have to go to four different stores or supermarkets and still can’t buy a single tin of what I need … start looking after Australian babies first before sending all of our stock overseas for a ridiculous profit. Money hungry f****.”
– Australian resident angered by infant formula shortages

Australians do not expect to see bare supermarket shelves but the unthinkable has happened. Infant formula is in short supply. Apparently, it’s all due to people sending tins of the stuff over to China where parents certainly don’t take abundant high-quality food for granted.

Australians have not only been surprised but outraged, as illustrated so delightfully by the opening quote from an anonymous news.com.au interviewee. Why, there have even been “semi-riots” at the checkouts!

The industry is struggling to increase supply, which isn’t easy as an article by Dairy Innovation Australia explains. A petition demanding the supermarkets ration infant formula has attracted around 4000 signatures and both Coles and Woolies have increasingly tightened restrictions.

Then, today, the Greens and the government agreed to make it harder for foreigners to buy Australian land and water. According to The Weekly Times, “the screening threshold for foreign buyers of agricultural land reduced from $252 million to $15 million, and down to $55 million for investment in agribusiness”.

It’s great to see that what we produce here on the farm is treasured by Australians but why isn’t it valued?

It seems milk is so cheap and abundant, it is worth less than water. Except when the farmer is offered a fair price for her land by someone who really appreciates its true value. How ironic that this the only time Australian food is too precious to leave to market forces.

 

8 Comments

Filed under Dairy Products, Farm, Milk quality, supermarket war and $1 milk

Fonterra’s Judith Swales explains Theo’s thoughts on Aussie dairy farmers

Theo Spierings Fonterra chief executive Theo Spierings. Photo: Pat Scala, Sydney Morning Herald

Fonterra is one of the world’s biggest dairy companies with a glittering history. A cooperative in New Zealand, Fonterra is also Australia’s second-largest processor.

Just last year, Fonterra delivered a stellar Kiwi farmgate price far better than anything ever enjoyed by Aussie dairy farmers. Analysts enjoyed debating why Australia could not emulate its success. Today, the co-op is under intense scrutiny from its shareholders.

As I mentioned in the previous post, farmers in New Zealand are doing it very tough this year and Fonterra Australia chalked up losses last year.

Then, last week, Fonterra’s chief executive Theo Spierings​, was quoted in the Sydney Morning Herald  in a story headlined Aussie farmers being overpaid amid global dairy rout, says Fonterra boss.

After quoting Mr Spierings as saying the current price of $5.60kg MS could not be supported, the Sydney Morning Herald reported:

Mr Spierings said the method on how Australian farmers were paid needed to change so it wasn’t based just on the farm-gate price and matched other processors.

“It’s loyalty and skin in the game that can lead to an upside. You can call it a dividend, or whatever, a bonus per kilogram milk solids,” he said.

“But we need to have the conversation now about what the endgame looks like. What is the value being created – what’s the size of the cake? Then we need to have a good debate with farmers … about how are we going to share – how are we going to cut the cake?

The comments raised a lot of questions for a Fonterra Australia supplier like me, especially in respect to the “Bonlac Agreement”, which extends until 2019 and commits Fonterra to paying its Australian suppliers a price that equals or betters the dominant processor.

I put some of those questions to Fonterra Australia and am grateful to managing director, Judith Swales, for answering them.

Judith Swales, Fonterra Australia managing director. Pic source: Australian Dairy Farmer

MMM: Why has Theo chosen to telegraph a change in Fonterra’s dealings with Australian farmers via the media rather than by opening a conversation with farmers?
JS: Theo was commenting on the global dairy situation and its impacts for Australia. He was putting a voice to issues that many in the industry are well aware of. These are difficult issues and shouldn’t be shied away from, and as an industry we need to address them.

MMM: Are there any inaccuracies in the article you would like to correct?
JS: The headline was unfortunate. The main issue to point out is that the problem is not around Australians dairy farmers being overpaid – as stated in the headline – but rather the impact global volatility is having on the sustainability of current dairy pricing in Australia. What’s important, is that we’re sending the right price signals to our farmers to avoid any surprises and so that they can budget for various scenarios.

MMM: Theo appears to cast doubt on the Bonlac agreement that ensures farmgate prices match or better the dominant competitor. Will Fonterra honour that agreement this year?
JS: We remain fully committed to honouring the Bonlac agreement. We are focussed on giving our farmers line of sight to the price we can pay this year as quickly and accurately as we can. The price we pay this year must be sustainable. We do not want to sacrifice investment in our long term strategy, which aims to deliver returns above the Benchmark price, in response to short term, tactical pricing pressures.

MMM: Does Fonterra remain committed to the Bonlac agreement in the medium to long term?
JS: We view the BSC Milk Supply Agreement as a baseline. We always strive to aspire to more – whether it be with our SupportCrew services, price risk management tools or our suppliers receiving the highest milk price (as found in an independent report by Ian Gibb for the 2013/14 season). We expect our relationship with our suppliers to continue to evolve over time.

MMM: “It’s loyalty and skin in the game that can lead to an upside. You can call it a dividend, or whatever, a bonus per kilogram milk solids,” says Theo. Does this mean special pricing that favours long-term contracts and large farms?
JS: Achieving a mechanism for determining milk price that drives behaviours that support the success of Fonterra’s strategy for all suppliers is our aim. This work is always evolving and we will continue work with BSC on this.

MMM: Farmers who supply milk to Fonterra Australia are suppliers rather than shareholders. What does Theo mean by “sharing the cake”?
JS: 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.

MMM: Does Fonterra continue to have a long term commitment to Australia?

JS: Absolutely we are committed long term to Australia; and our Board continues to voice this commitment. Australia is one of our four key strategic markets for Fonterra. It is a key plank to our global multi-hub strategy, which complements our Retail and Foodservice business. We continue to invest: we are progressing our Beingmate partnership; we have plans to rebuild our cheese plant in Stanhope; and only this week we commissioned a multi-million dollar Beverages plant in Cobden.

Thank you very much, Judith Swales!

8 Comments

Filed under Dairy Products, Farm, Fonterra

How our milk is tested for antibiotics

Milk testing

Yesterday, I explained why and how we use antibiotics to treat a cow who falls ill in the herd, together with what we do to make sure no antibiotics get in the milk that leaves the farm.

In this post, Fonterra’s quality manager for milk supply, Sarah Carter, answered a few questions about how the milk is screened for antibiotics by the milk factory.

MMM: Why is it important to keep antibiotics out of milk?
SC: Customers, consumers and markets have very clear requirements that dairy products are to be free of antibiotic residues. The two main reasons for this are: the risk of causing allergic reactions in humans (e.g. from penicillin), and the concern about a build-up of antibiotic resistance as a result of consumption of dairy products containing low levels of antibiotics.

MMM: What does the law say about antibiotics in milk?
SC: In Australia, the Australian Pesticides & Veterinary Medicines Authority (APVMA) assesses agricultural and veterinary chemicals, such as cattle antibiotics, as being suitable and safe for use. They set Maximum Residue Limits (MRLs) after undertaking a thorough evaluation, including a dietary exposure assessment. These MRLs apply to domestically-produced foods, and are set well below the level at which any residues would be harmful to human health. The MRLs are set at levels which are not likely to be exceeded if the approved label instructions on the antibiotic product are correctly followed.

MMM: How and when is the milk tested?
SC: Most, if not all, dairy companies test tankers of milk for antibiotics prior to unloading at the factory, to avoid any contaminated milk entering the supply chain.

A number of dairy companies will also have the individual farm milk samples randomly tested during each month to further discourage farmers from taking a risk and allowing a vat-load of milk to be collected where perhaps a treated cow had been accidentally milked.

At Fonterra, we have both these measures in places – we are very clear that to maintain and build the market relevance of our dairy products, dilution with milk from other farms in the tanker is not the solution.

MMM: How sensitive are the tests?
SC: There is quite a wide range of tests available to detect antibiotics in milk, and the detection limits for antibiotics vary between tests. All dairy companies have their antibiotic testing procedures audited by the relevant state dairy regulatory authority (such as Dairy Food Safety Victoria) to ensure that their chosen test method is suitable for purpose and based on a risk assessment.

Different test methods will have different sensitivities to the various active ingredients found in commonly-used antibiotics – there is a technical information note available on the DFSV website which lists the common tests and their detection limits.

MMM: What happens if antibiotic residues are detected?
SC: If antibiotics are detected at the tanker level (prior to unloading into the factory), the entire tanker load is rejected and the milk disposed of (e.g. via the factory environmental management system).

Traceback testing is undertaken on all farms on that tanker load, to identify the source of the issue. We then undertake an on-farm investigation to get to the root cause of the problem and put measures in place to ensure it doesn’t happen again. All antibiotic-positive tankers must be reported to the state dairy regulatory authority, and followed up with a report stating the findings of the on-farm investigation.

If antibiotics are detected on a random farm sample test, we again undertake the on-farm investigation to help the farmer identify what went wrong. We also undertake a trace-forward to check for any impacts to products manufactured from this milk.

Farmers receive a penalty for supplying antibiotic-contaminated milk, and this penalty increases significantly if it happens again – fortunately, repeat offenders are incredibly rare, which demonstrates that the investigation and corrective action process achieves what it’s meant to.

At Fonterra we also encourage our farmers to get in touch with our SupportCrew milk quality specialists, who can assist farmers with advice and support to minimise the risk of mastitis in the first place.

Thanks Sarah!

3 Comments

Filed under Dairy Products, Fonterra, Milk quality

Mastitis, antibiotics and milk

Why do we use antibiotics on our farm? Very simply, because despite everything we do to look after their well being, cows, just like people, sometimes fall ill and need antibiotics to get better.

It’s very rare that any of our 260 milking cows become lame with an infection while digestive problems are almost unheard of here and, in any case, do not require antibiotics.

The number one illness we treat on our farm is mastitis. If you’ve breastfed a baby yourself, there’s a fair chance you’ve experienced mastitis. In both cows and women, the symptoms include swelling, warmth and redness for light cases. Nasty cases bring flu-like symptoms that, in cows, can progress to become extremely serious.

How we prevent mastitis
So, how do we reduce the incidence of mastitis on the farm? We begin even before the calf is conceived by selecting sires whose daughters show a naturally lower susceptibility to mastitis.

At the same time, we minimise the risk of infection by keeping the cows and their environment as clean as possible. Tracks are maintained so there’s less mud around to flick onto teats and cows are happy to walk straight to their grassy paddocks rather than spending their rest times on mucky surfaces.

Cows resting in the paddock

Cows resting in the paddock after milking

The cows are well fed with a carefully balanced diet that is mostly grass and we treat the cows with care to minimise stress. It’s a slow, gentle walk to the milking shed, there’s no shouting and if I see one of our cows run, there’d better be a good explanation!

The hygiene of the dairy is important, too. We clean any dirty teats before the milking machine cups go on and spray them afterwards with a mix of iodine and glycerine to disinfect and protect them. We also routinely test the milking machines to make sure they are gentle and effective.

And we’re vigilant. Not surprisingly, when you spend hours every day with the cows’ udders at face level, you notice a sore cow quite quickly. A sore cow is an unhappy cow and an unhappy cow is an unhappy milker, too. Everyone who milks in the dairy has been specially trained at a “Cups On, Cups Off” course to look for mastitis and put top priority on the comfort of our cows.

Sometimes, cows have sub-clinical infections that don’t show any symptoms, so every few weeks, we collect samples of milk from every cow and have them analysed at the local herd test centre lab.

It’s a lot of work but it’s important work. The comfort of the cows is our number one priority and there are implications for the quality of the milk, too. If there is too much mastitis in the herd, our milk has a shorter shelf life.

One thing we don’t do, however, is include antibiotics in the cows’ feed. Routine antibiotic use is not legal and would mean that none of our milk would be useable.

Treating mastitis
When we find a cow with mastitis, we don’t wait to see whether she goes downhill, we treat her immediately with the medicine prescribed by (and only available from) our vets to help her recover fast. Antibiotics help the cow feel better in a day and we keep on milking her so that her udder is well drained and kept as soft as possible.

Making sure milk is free from antibiotic residues
The milk we collect from a treated cow is tipped out until there is no risk of antibiotic residues in the milk. The antibiotics come with quite precise details of how long they remain in meat and milk. It’s critical information because nobody wants food laced with antibiotics, especially those with life-threatening allergies.

As precautionary measures, we:

  • paint the cow’s udder red as a warning to everyone in the dairy that she either needs more treatment or to have her milk disposed of,
  • write her treatment needs and the time her milk needs to be withheld from the vat on a whiteboard in the dairy for all to see, and
  • record all her treatment details in a quality and treatment register.

After she has finished a course of treatment, we check the cow again to be sure the infection has cleared up.

Testing for antibiotic residues
Even with all these protocols, it’s good to know that if milk contaminated with antibiotics somehow got into the vat, there are more safeguards in place. In the next post, a guest from milk processor, Fonterra, will explain how they test our milk for antibiotics.

The bottom line
Our cows live good, healthy lives and rarely fall ill but when they do get sick, we give them the best treatment available straight away. For people and animals alike, antibiotics are our last line of defence against misery and death, so we use them only when really needed and then with great care. And I don’t want to go back to a world without them.

7 Comments

Filed under Animal Health and Welfare, Cows, Dairy Products, Farm, Milk quality

The trouble with the MG and “Gary the Great” sideshow

Murray Goulburn’s colourful managing director, Gary Helou, is not universally loved and he’s become a bit of a target over the last year or so.

Some dairy farmers are nervous about his proposed transformation of the much-loved 100% farmer-owned co-operative into a “farmer-controlled” hybrid or are alienated by his brash, bullish style.

Some of his competitors hate him for driving up the price of raw milk (which is, of course, his mandate) and they also deeply resent this Devondale ad:

Given that Gary himself is a suit-wearing Sydney-sider who flies in weekly to MG’s Melbourne headquarters where a large corporate Mercedes Benz awaits him in the basement, he could be accused of a little hypocrisy.

So the acerbic commentary from the Financial Review directed at the so-called “Gary the Great” generates plenty of sniggers, including yesterday’s piece, which was republished outside the pay wall in The Land.

The article reveals a series of sales figures that suggest sales of MG’s Devondale branded products have tanked disastrously, followed by an observation that:

“When Helou locked Murray Goulburn into a decade of skinny margins supplying Coles with its $1 milk, his rationale was that it would lead to growth in his branded products and thus higher margins for his farmers.”

“But the growth has not transpired, which means the margins are on borrowed time – especially as Helou juggles significant debt covenants, tries to raise $500 million in new capital and wears major cost blowouts getting his new processing facilities online.”

Are the figures fair? I asked dairy industry analyst, Steve Spencer of Freshagenda, about the data quoted in the story.

“The figures are sourced from retail scan sales data reports, which are expensive and normally only purchased by some of the larger supermarket suppliers,” Steve explained.

“The figures supplied to the Financial Review are current and specific and certainly not publicly available, so the data was most likely leaked by a competitor. It’s unlikely that any of the figures were inaccurate but could have been used selectively to paint a certain picture or the columnist’s agenda.”

But if the article is fair, it’s worrying news for MG farmer shareholders. I invited MG’s Robert Poole to answer a series of questions to set the record straight:

  • Are the figures quoted in the Financial Review a fair representation of Devondale’s sales performance?
  • To quote from the Fin Review: “According to Murray Goulburn, a big upside of the Coles deal was that it would ‘drive significant growth in sales for [its] core Devondale milk and cheese brands in the years ahead’”. To what degree does the profitability of the Melbourne and Sydney plants rely on the sale of Devondale products?
  • How do actual Devondale sales figures compare to the budgets set when the plants were planned?
  • Does Murray Goulburn continue to enjoy “preferred supplier status” with Woolworths?
  • How have the Devondale sales at Woolworths compare with those at Coles?
  • Does MG plan to review its product mix or marketing strategy in light of Devondale’s sales performance?
  • How does Devondale’s sales performance compare with other areas of MG’s business?

Robert pointed me to a media release on MG’s website released later in the day. Unfortunately, it does not answer the questions. Instead, it plays the man rather than the ball, providing any genuinely concerned farmer shareholder little comfort.

Are the criticisms of Gary Helou and MG simply sour grapes or dirty competitive tactics? I hope so but it seems only time will tell. This is the tragedy of the “Gary the Great” sideshow: it all descends into an ugly bun-fight in which, ultimately, the farmer is the loser.

EDIT: I HAVE WOKEN TO AN EMAIL FROM ROBERT POOLE INDICATING THAT HE WILL BE PLEASED TO ANSWER THE QUESTIONS TODAY (20/02/2015).

13 Comments

Filed under Dairy Products, Farm, Murray Goulburn

How an FTA with China will keep fresh milk on Aussie tables

Please, sir, may we have an FTA4dairy?

Please, sir, may we have an FTA4dairy?

If you live in the big Australian states there’s a real chance the milk on your Weeties has to be trucked across the Nullabor or over the Murray. Why? Continue reading

1 Comment

Filed under Community, Dairy Products, Farm

Australian dairy: does it matter if it’s sold to China?

Worth saving?

Worth saving?

Does Australian milk matter? We have to decide.

It seems two of Australia’s milk processors, United Dairy Power and Warrnambool Cheese and Butter, are about to be sold to China. Firms backed by the Chinese government are having unofficial talks that would put the price of WCB at a staggering $10 per share.  Meanwhile, the ruthless but charming Canadians continue to acquire a bigger stake of WCB.

Here, close to home, another Chinese firm has already purchased a formerly decommissioned factory and is repackaging milk powder to send back to China. (It’s been a debacle, with outraged and distraught workers regularly featured in the local papers desperate to be paid.)

It’s not limited to the dairy processing sector, either. The Chinese have been buying up our breeding stock for years and now, they want our farms, as Brett Cole reports in the Business Spectator:

“For more than a year, China Investment Corporation has contemplated acquiring Van Diemen’s Land Co, which owns and operates 25 dairy farms with 30,000 dairy stock. Other Chinese companies have moved decisively amid concerns about their nation’s safety standards.”

All this while our Australian farmer co-op, currently the highest bidder for WCB, languishes in the competition tribunal as it ponders – for months – whether we are allowed to bid at all.

Do you care? If you’re a dairy farmer, hell yes, you should. No foreign company cares about your future like you do or your co-op does. Perhaps worse still, once these assets are sold, the fragmentation and inefficiency of our processing sector is locked in, forever limiting the price farmers are paid for our milk.

If you’re not a farmer but an Aussie, there’s an awful lot to be lost. These international companies and governments so keen to pay more than twice the value of WCB are not irrational. They want control of their food. Does that matter to you?

39 Comments

Filed under Community, Dairy Products, Farm, Warrnambool Cheese and Butter