UPDATE: Milk Price Index definitely back on

Index

SECOND UPDATE 23/01/18: Hours after the Department provided this update, the Minister’s office rang to clarify the CMPI’s status with this news:

“The Minister last week met with dairy farmers and senior dairy leaders who expressed support for the further development of the dairy price index.

“The Government is committed to working with industry to deliver the index to provide dairy farmers with extra information to help them plan and risk manage their businesses.

“The Minister is encouraged by the positive approach of dairy farmers to rebuild from recent challenges to create a stronger and more profitable future for the industry.”

It’s on again!


UPDATE 23/01/18: After the UDV president, Adam Jenkins, tweeted that the post below was incorrect, I asked the Department for further clarification. Here is the response:

  • “The contract in place to deliver the Commodity Milk Price Index was terminated by mutual agreement.”
  • “The department will put options to the Minister for Agriculture and Water Resources on the best way forward to deliver on the government’s commitment to achieve greater transparency and market signals in domestic and global milk prices, in accordance with the advice received from industry.
  • “This may still be via the CMPI.”

Meanwhile, Milk Maid Marian has been informed that the team which had won the contract to deliver the Commodity Milk Price Index has not been permitted to engage with stakeholders since late last year.


The Milk Price Index intended to offer farmers transparency around farmgate milk prices has been quietly scrapped.

It’s not yet clear where the $2 million set aside for the project will be reallocated.

In response to an email from Milk Maid Marian, a spokesperson for the Department of Agriculture and Water Resources said:

“The Department of Agriculture and Water Resources and Webber Quantitative Consulting have mutually agreed to terminate the contract to deliver the Commodity Milk Price Index.”
“The department will put options to the Minister for Agriculture and Water Resources on the best way forward to deliver on the government’s commitment to achieve greater transparency and market signals in domestic and global milk prices, in accordance with the advice received from industry.”
For Milk Maid Marian’s money, some really rigorous research into how the milk pricing system could be reshaped to address the issues identified by the ACCC would be very well spent indeed.

 

Of course our cows are sentient

Heifers and Zoe reach out

“You can trust me”

Any dairy farmer who does not know her cows are capable of feeling pain and suffering, or pleasure and comfort, should be stripped of her licence.

Yet this simple concept, called sentience, has created one hell of a ruckus after the Victorian government released its Animal Welfare Action Plan this month. All sorts of farm leaders have railed against the use of the term, calling it a “slippery slope” and claiming it could actually hurt animals.

“…the introduction of sentience will cause adverse welfare outcomes for animals as production systems are thrown into chaos. It will render some farm businesses unviable, causing job losses and untold economic damage to regional communities and cripple the supply chains that rely on these businesses.” – VFF media release, January 5, 2018

As a farmer who works with cows every day, I have no idea what’s prompted this outrage but I do know it’s got nothing to do with whether cows are sentient or not. Of course they are.

Farmers are animal practivists: we balance what’s best for the welfare of our cows all the time. How long do we keep treating that downer cow or should we euthanase now? And the big one: should we rear the calves with the herd or away from their mothers?

I get the feeling that our agripoliticians are on the offensive because they’re worried what the animal activists rather than practivists out there will do with the inclusion of sentience in welfare law.

The problem is that everybody knows cows are sentient. To deny it makes farmers look either cruel or willing to say anything at all to avoid being accountable. How we achieve the best outcomes is certainly very debateable but the need to consider cow comfort is not.

The importance of cow comfort is already well accepted in dairy circles. Cows and farmers do better when animal health and wellbeing is a priority. Goodness, it’s practically a science of its own! A quick Google reveals dozens of research papers on the subject.

The minister is being very courageous. It’s about time our leaders were, too.

 

A milk maid’s New Year resolutions

The experts say the secret to holding true to your New Year’s resolution is to pick just one. But that’s proved quite a task for the Milk Maid this year. On my list are:

  1. I will not eat dark chocolate during times of stress.
  2. I will always hold my tongue the right way to prevent machinery breakdowns
  3. I will get plenty of rest to avoid killing myself.
  4. I will sacrifice more goats to the volcano gods.
  5. I will cultivate a moth nursery in the cheque book.
  6. I will not be a doormat for the local hooligans.
  7. I will whittle my paperwork mountain into a manageable prairie.
  8. I will accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.
  9. I will sharpen my aim during times of stress.
  10. I will always remember and cherish what really counts.

HelpingHand

Happy New Year!

The unseen farm support crew

Wayne is one of those rather colourful yet very black and white people but, the other day, he sounded peculiarly uncertain.

“I’ve got a problem with the irrigator,” he said. “Maybe you should come and have a look.”

We’ve worked through more than our fair share of problems with irrigation in the last year.  Pipes blowing apart, toppling hydrants, underground leaks, you name it – one disaster after another – so just the mention of another drama had my blood pressure rising. I pressed Wayne for more details.

“It’s on a tilt,” he said. “Okay, don’t come and look then!” he blustered.

I figured I’d really better come and take a look.

IrrigatorWonkyLoRes

After uncoupling it from the hydrant, Wayne had been towing the irrigator away to another paddock when a wheel found the softer earth over the original trench and buried itself. You might be able to see the tyre tread just below the blue strut on the right hand side.

IrrigatorWonkyTyreLoRes

The pair of us eyed the situation warily. The irrigator had two lifting points on each side. Was this the time to call the neighbours and see if we could get a posse of tractors to round up the wily wheely waterer?

On the other hand, the irrigator is one of the most expensive bits of gear on the farm and, with thirsty crops in the paddocks, mangling it didn’t bear thinking about.

Instead, I called the local heating and plumbing service, which also happens to install power poles.

The following day, a white knight in the form of Eddy the crane truck operator arrived.

In about two minutes flat (and safely further away from the power lines than it looks on the video), he had the irrigator back on solid land, albeit still looking a little saggy thanks to a popped tyre.

“We’ll have that off and into  town pronto,” Wayne crowed with a heady mix of relief and triumph.

It turned out none of our jacks were strong enough to support the 2.5 tonne whirly gig. Cue, another distress call, this time to the tyre service.

It just went to show that no matter how self-reliant we like to fancy ourselves, keeping the wheels turning on farm relies on a squadron of support people.

So, this Christmas, we owe a big dose of gratitude to all the townies we rely on to get the milk into the tanker. Just looking through our accounts, we have all these people to thank this year:

  • agronomist
  • crop and harvest contractors
  • quarry and earthmovers
  • stockfeed supplier
  • hay supplier
  • breeding experts
  • vets
  • herd testing
  • mechanics
  • auto electrician
  • electrician
  • hardware supplies
  • bankers, insurers and accountants
  • dairy technicians
  • dairy hygienists
  • refrigeration mechanics
  • metal fabricators
  • plumbers
  • rubbish removal
  • milk processor
  • stock agents

It’s a big list that removes any doubt regarding just how many jobs dairy farms generate off farm and still doesn’t include all the people we employ via levies and taxes, like the Dairy Australia and Agriculture Victoria brains trust.

Thank you to every single one of you who’ve helped us make 2017 a success.

 

 

Nightmare November, divine December?

With about half the normal rainfall in October and about a third of normal in November,  the silage harvest was, well, wanting.

NovRainfall

We’d barely gotten the last bale off the paddocks when, one Tuesday morning, Clarky sounded the alarm.

“You’d better get Marian straight down to paddock 19 to have a look,” he said.

Now, Clarky is the king of the understatement. Nothing from snake to bushfire seems to rattle the fellow so, when, he said, “straight down”,  I dropped everything to investigate.

It was an invasion. Marching from west to east were legions of centimetre-long army worms.

Army wormsSquare

A few of the voracious Army Worm larvae

Army worms are as destructive as a team of teenage footy players on grand final night. They descend en masse and literally eat everything in sight.

They weren’t anywhere to be seen the day before and were suddenly in plague proportions, crawling across the track, aloft on ryegrass stalks, wriggling along the rim of the trough.

A careful inspection of the paddocks revealed a heavy infestation from boundary to boundary. The choice was stark: spray or pray.

After a sub-par Spring, this was the last thing we needed. The caterpillars would very likely leave nothing for the cows to graze. On the other hand, spray is the method of last resort.

As the sun moves overhead, army worms retreat to the cool spaces at the base of the pasture, unseen and untouchable. Spraying has to be done at dawn or dusk and the chemicals are nasty, killing pretty much every living thing – good and bad – they touch.

We may not have an organic farm but we don’t like pesticides. It’s much better to let the beneficial insects, like the beautiful Glossy Shield Bug identified for me on Twitter by Dr Manu Saunders (@ManuSaunders), keep the nasties in check.

ShieldBug

Juvenile glossy shield bug (Cermatulus nasalis)

But when you have a plague like this following a Spring drought and a forecast game-changing big rain is on the way?

The Department of Ag reckons “spraying is recommended when the density of larvae exceeds 1 to 3 larvae per square metre”. That made me giggle nervously, given our infestation of “too many to count” per square metre. Reluctantly, yet desperately, I put in the call and quarantined the cows in a separate section of the farm.

Four weeks on and the worms have all but disappeared, continuing to flourish in just a couple of paddocks where excess leaf litter provided cover.

When the drenching December rain came, I was grateful I’d taken this path. With the army worms vanquished and drought broken, the cows were free to graze lush grass again.

While I hate using pesticides, I have a sneaking suspicion I’d better get used to it.

The Department notes:

“Major outbreaks occasionally occur across Victoria, particularly after periods of drought. There are many factors which may lead to an outbreak. They may arise from large invasions of moths which have bred in arid regions of New South Wales, South Australia or western Queensland. Alternatively, they may arise because of significantly less mortality of eggs and young caterpillars. Droughts appear to trigger outbreaks because of the adverse effects they have on the natural enemies of armyworms; these predators and parasites are much slower in recovering from a drought than are armyworms.”

As the climate becomes more volatile, we can expect wild swings in bug populations, too. Sorry, Tony, it’s not beneficial but, yes, I guess it’s just part of farming.

ACCC delivers a ladder for dairy farmers

All I could think as I scrolled through the interim ACCC dairy report was “Wow!”. Any fears farmers had that the ACCC would fail to understand the intricacies of our industry have been well and truly put to bed. This report proves the regulator gets it.

“…the problems we have identified in this inquiry emanate from the inherent bargaining power imbalances in the industry, particularly between processors and farmers.”
– p. 22, ACCC Dairy Inquiry Interim Report

While there are more than 200 pages of very interesting information, the really important section deals with the regulator’s eight recommendations:

1. Processors and farmers should enter into written contracts for milk supply that are signed by the farmer.

2. All processors should simplify their contracts where possible, including by minimising the number of documents and clearly indicating which documents contain terms and conditions of milk supply.

3. Milk supply contracts should not include terms which unreasonably restrict farmers from switching between processors.

4. The industry should establish a process whereby an independent body can administer mediation and act as a binding arbitrator or expert in relation to contractual disputes between farmers and processors.

5. Farmers should ensure they have properly considered the legal and financial implications of contracts with processors.

6. Processors should publish information identifying how their pricing offers apply to individual farm production characteristics to enable better farm income forecasts.

7. The Voluntary Dairy Code should be strengthened
Notwithstanding Recommendation 8, the Voluntary Code will continue to operate for at least the short-to-medium term. The following amendments should be made:
(a) processors to include a comprehensive dispute resolution process in their milk supply agreements, including where this relates to compliance with the Voluntary Code itself
(b) processors to provide timely price and other contract information before requiring farmers to make a decision about renewing a contract.
(c) with regard to section 6 of the Voluntary Code, removal of the incumbent processor’s first right of refusal regarding a farmer’s supply of milk to an alternative processor.

8. A mandatory code of conduct within the Competition and Consumer Act 2010 should be considered for the dairy industry.

It’ll take time to digest the report properly and I’m betting that some of the details will be hotly debated over the next few weeks. That’s a good thing.

This ACCC inquiry is not a whitewash. The system is broken and such a strong report offers us a way to climb out of the deep hole we’re in towards the light.

A new big Aussie dairy co-op?

ReneDedoncker

Fonterra Australia’s managing director, René Dedoncker

“It’ll be months, not years,” says Fonterra Australia’s managing director, René Dedoncker when I ask him about plans to form a new big Australian dairy co-op.

Industry veterans will tell you the idea of Fonterra forming an Australian co-op is not new and seemed a real possibility after the demise of that other great milk co-op, Bonlac, in the early 2000s. So, why now?

“I think the time is right,” says René. “This is a value proposition at a time when the industry is fragile.”

“Fonterra Australia is also in a great position to reduce risk. We have learnt from our mistakes and have a stable, repeatable business model with a balanced customer and product mix. Confidence, if not trust, is running high.”

I cough a little nervously and ask René how he expects farmers would rate Fonterra in the trust stakes and whether that might be a problem.

“Trust may well be a stumbling block.” he concedes. “Farmers – even those who’ve been supplying us for many years – tell me it will take years to rebuild. Purely on trust, we could well be ranked quite low but we are working hard to regain that.”

“I can tell you that there is not a key decision made without the input of farmer voices.”

The consultation on the co-op idea will officially begin at the Bonlac Supply Company AGM next week and be discussed at farmer forums across the country.

If it gets a sufficiently warm welcome, the next stage in the process will be discussions about the form the co-op would take.

“We already have several different models in mind,” René says, “but at this stage we want to keep it simple and see whether there’s an appetite for this co-op.”

What Rene can say is that there won’t be a mandatory requirement for farmer suppliers to “share up”, matching share numbers to milk production.

“We need to make it attractive and give everyone an opportunity to participate. Farmers will also be able to supply Fonterra Australia without becoming shareholders,” he explains.

It’s also decided that the shares would be in the Australian operation only, rather than the global Fonterra organisation. The Australian co-op has the blessing of the board of directors but would not need to clear a Kiwi shareholder vote.

The plans towards forming a co-op has “paused” the progress of a replacement for the Bonlac Supply Agreement, René says. While that replacement has already been drafted, it won’t be made public until it’s clear it would suit any new co-op model.

It has done nothing, however, to dampen Fonterra’s Australian expansion plans. The processor has already committed to lifting its processing capacity by another half-a-billion litres over the next six months and will add another half-a-billion within 18 months.

While René stresses that the 3 billion litre target is in capacity rather than milk supply (allowing enough headroom for a bumper season), he says the processor is aiming for a milk supply of 2.6 to 2.7 billion litres within two years.

At the same time, Lino Saputo Jr is on record saying Warrnambool Cheese & Butter will win back the milk MG lost. And, of course, the main beneficiaries were Fonterra and WCB itself.

“What about Saputo?,” I ask.

“We’re running our own race,” says René. “We have incredible confidence in our business and they’re offering powerful competition that’s good for our industry.”

“It might be better to ask Saputo about us.”

Bad moon rising?

NoEvil

Hear no evil Pic credit: Apartline.de

It’s no secret, the last couple of years on the farm have been bloody tough. The 2015 drought cut deep here, only to be followed by the dairy debacle of 2016. Now the historic agreement to sell Australia’s last big co-op has us in unchartered waters.

We just need a bit of a breather to recover and keep our heads above water.

During the last two years, we’ve closed down spending as much as possible. We haven’t sacrificed feeding cows or looking after our soils but, beyond that, if it could wait, it did.

It means we have some maintenance to catch up on, especially the farm laneways that the cows use to get to and from their paddocks. Maintaining tracks is expensive and we have the equivalent of a very good year’s profit to make up as well as new debts to repay. It hasn’t been a very good year yet.

So, you can imagine how it felt when I heard Freshagenda’s revised forecast for next financial year, which basically said milk prices are headed down again. Not good. Demoralised and, honestly, rather cranky.

But is there really anything to worry about?

After all, a year (or even half of one) is a long time in dairy commodity pricing. Freshagenda notes there are plenty of variables, like exchange rates, the weather in New Zealand and even the Russian ban on dairy products, that can all still make a big difference to the outcome.

This farmer’s left wondering whether it’s safe to let the moths out of the cheque book for that much needed maintenance.

If I spend too much, there might not be enough left in the kitty for another tight year. If I keep the hatches battened down, the tracks will cost a fortune to bring back to square one in another two years’ time.

While all of that is a big deal for me, others argue there’s much more at stake. There’s the psychological impact on farmers for a start.

If social media is any guide, plenty of farmers have had a gutful of industry turmoil and tight times. Some of them will curl up into a little ball, some will grin and bear it, while others will simply walk away.

I’ve heard farmers suggest it’s irresponsible to publish something like that when the industry is on a knife edge. Others worry that the processors will use commentary like this to jawbone the farmgate milk price down.

Either way, they argue, it could help to dampen milk production for another year, reducing Australia’s ability to be an efficient, reliable exporter.

With all this in mind, it’s not surprising Freshagenda has copped a bit of flack. Its founding couple, Jo Bills and Steve Spencer, shouldn’t be surprised. Dairy Australia famously stopped issuing similar forecasts after similar blowback.

Asked for comment by Milk Maid Marian, DA explained its approach this way:

“Dairy Australia exists to provide our farmer stakeholders with the most accurate and up to date information so they can make informed decisions around their business practices.”

“Our role in this space is to provide an unbiased view on current market trends and drivers, through publications like the Situation and Outlook report.

“Milk pricing varies greatly from processor to processor and farm business to farm business. Our approach is to provide the information and insights that farmers can apply to their own context, and draw much more meaningful conclusions than an industry ‘average’ price.

“DA moved away from providing an exact prediction on milk pricing for a number of reasons, these include:

–          The risk of eroding competition for milk and unduly influencing market decisions made by processors.

–          The industry is now in an environment where there is significant variation in processor prices meaning that no price will ever apply to everyone.  This has not always been the case.

–          Milk pricing is extremely complex and there are too many variables for DA to confidently predict a single/universal price.”

It provides all the ingredients for a powerful argument against the proposed $2 million milk price index that seems to have gone very quiet.

On the other hand, Freshagenda is not the only one pointing to a softening in global dairy commodity prices. A quick Googling will reveal analysts from around the world coming to the same conclusion that this cycle is already turning. The processors all know it and can point to any amount of evidence for a lower new season’s price if they want.

Freshagenda has simply put that into context for Australians.

Yes, they’ve also put a number on it, or “numbers” I should say as they’ve actually offered a fairly broad price range that comes with the expected caveats regarding changing conditions.

When the dairy debacle of 2016 unfolded, it caught farmers by surprise. Many asked why they weren’t warned. We can’t have it both ways.

The question is: would you want to know if there’s a bad moon rising? At spreadsheet-time, yes, I would.

 

 

About the loss of MG

“We are stealing from the graves of our founding fathers and the cribs of our children,” were the words of former co-op chairman Ian MacAulay after the vote in favour of MG’s partial float was passed.

History has proven him right and it’s a travesty for our industry.

I’m not going to dwell here on how it feels because I’m sure that, by now, you’ve heard from plenty of others and my story is by no means unique.

All I can offer you is a list of questions for MG to help explain what comes next and the implications of the agreement it’s signed with Saputo. I’ve been assured they will respond but, understandably, it might take a little time.