Raining on MG’s parade: the shrinking milk pool more serious than the big wet


Here’s something new: wet weather in parts of Victoria now means farmers must be paid less for their milk.

MG came out with another adjustment to the milk price on Thursday. In a nutshell, the MSSP (aka the “Clawback”) has been put on ice. At the same time, the best price MG expects to be able to offer farmers this season (called the “closing price”) has been revised down by a little bit more than the “clawback of the clawback” returned to farmers’ pockets.

I must admit that while I was expecting the clawback of the clawback, I wasn’t expecting MG to revise down the forecast closing price because analysts are cautiously optimistic that the global market for milk is recovering. It’s supposed to be all up from here.

The problem is MG forecasts its milk intake to be 20 per cent lower this season and, after stuffing warehouses full of surplus product last year, it now doesn’t have enough product to sell. Conceding losing 350 million litres to retirements and competitors, MG blames the remainder of the loss on wet weather. The reality is that the weather is just one part of the equation. The main reason production is down is man-made and does not rate a mention by MG: the low milk price.

Low milk prices mean less milk production
The low milk price hits production in two important ways:

  1. Cows are sold, leaving fewer in the herd producing less milk per farm
  2. Cows are fed less grain and produce less milk per cow

Fewer cows in the dairy
The grim reality is that most Victorian dairy cows are worth more at the saleyards than in the dairy this year. Farmers culled their herds during last year’s drought and, now, many struggling to pay the bills have culled hard again.

Less milk-producing feed
The cows that remain in the herd are being fed less grain than last year, simply because it’s not viable. Here in Gippsland, we are paying $310 per tonne for supplementary feed. The rule of thumb is that a kilogram of grain returns a kilogram of extra milk.

Right now, my own farm is getting 26.9 cents per litre during Spring (while most MG suppliers will be getting even less), so we lose roughly 4 cents per litre with every extra kilo of grain. We just can’t afford to produce more milk beyond what’s needed to service our overheads and keep the cows healthy.

It’s not actually that wet for MG – at least, not everywhere
The other mystifying statement about the claim that wet weather is the cause of the loss of production is that, actually, large areas of MG’s supply area aren’t experiencing record wet conditions and some areas are having a bumper season.


Source: Bureau of Meteorology

Yes, the south-west of the state, South Australia and parts of Tasmania are having a terribly wet season but Gippsland and the north are not, if you are to believe the Bureau of Meteorology.

Dairy Australia figures from last year show the production of each area:

Financial Year 2015/16
RDP Litres %
Dairy SA 514,039,216 5%
DairyTas 882,965,394 9%
DairyNSW 792,948,581 8%
GippsDairy 2,006,004,931 21%
Murray Dairy 2,267,951,005 24%
Sub-tropical Dairy 550,148,921 6%
Western Dairy 387,147,057 4%
WestVic 2,139,492,819 22%
Grand Total 9,540,697,924 100%

Of these, it’s only fair to remove DairyNSW, Sub-tropical Dairy and Western Dairy because these areas are either not collected by MG or have special pricing not affected by the announcement.

If you assume all of Dairy SA, DairyTas and WestVic are hit by the wet but GippsDairy and Murray Dairy are okay, the picture is not nearly so dire. In fact, the source of 55% of the litres in MG’s supply area isn’t too wet at all!


So, yes, the wet is a problem – an especially big problem for farmers in the south-west who have my sympathies – but unlikely to be anywhere near as big a problem as last year’s drought, which affected pretty much the entire collection area.

If anything, the processor most affected by the weather may well be Warrnambool Cheese & Butter and it increased its milk price to $5.00 per kgMS in late September. The MG milk price (without the now suspended MSSP) is now $4.60 per kgMS and the forecast is for $4.70 by the end of the season. Ouch.

The bottom line
It all boils down to this: low milk prices lead to lower milk production – even in a reasonable season – and make it even harder for farmers to cope with difficult seasons.
What Thursday’s announcement from MG reveals is that farmers now face a vicious cycle, given the expected loss of 20 per cent of the co-op’s milk supply since last season.


The challenge for MG’s board now is to stop another closely-related vicious cycle from spiralling out of control, as it did for its once-great competitor co-op, Bonlac. That would be a dreadful outcome for our entire industry.



Filed under Farm, Murray Goulburn

The big opportunity for MG, the last big co-op


To many dairy farmers, Murray Goulburn is much more than a milk processor. It’s their co-op. I know, it was my co-op too. For the record, our farm had always been a dairy co-op member for generations, even before MG was formed, until just before the partial float.

But sometimes, that zeal can backfire. It’s counterproductive to say farmers can leave the co-op without penalty and then openly consider placing special conditions on returnees. Zealots also look foolish, or callous, publicly arguing black is white in an attempt to airbrush the hurt caused to so many since April. Nor is it okay for them to harass anyone – as I was this weekend in private messages – who simply points out inconvenient facts. Aggression is not the path towards conversion.

As MG director-elect Craig Dwyer pointed out on Twitter this morning, the fish rots from the head.


And this is where Murray Goulburn is at a crossroads. Until the April trading halt, it had been travelling at what the then MD Gary Helou loved to call “break-neck speed” towards its vision of becoming a “first choice dairy foods company”. The co-operative ethos had faded into the background.

Over the last few years, MG’s culture has moved away from that of a real co-op towards a company. “Each for all and all for each” once graced the cover of MG’s annual report but in its submission to the Senate inquiry published just days ago, MG revealed there were many more “special deals” than many had suspected (see below).


Excerpt from MG Senate Inquiry into the Dairy Industry submission (p. 10)

The zealots often lament the treatment of MG by the media and commentators like me. The reality is that this scrutiny offers the co-op a massive opportunity. Everyone is listening and the story MG could tell is compelling. It is the last big Australian dairy co-op (with apologies to Queensland’s Norco) and many – even those who have fled MG – still cherish the co-operative spirit. We just need to know that MG does, too.


Filed under Farm, Murray Goulburn

The dairy decency code

Hailing it as “a major breakthrough” for the relationship between Victorian dairy farmers and milk processors, the United Dairyfarmers of Victoria (UDV) has announced industry stakeholders will work towards a Voluntary Code of Conduct.

But what’s so special about the agreement to draft a voluntary code, you ask? A curious Milk Maid Marian asked UDV president Adam Jenkins a series of questions to learn more. Thank you Adam for responding.

MMM: Why is there a need for a code of conduct?
AJ: A voluntary code of conduct enables farmers and processors to come together to discuss agreed terms and conditions around the current Milk Supply Agreements and Contracts. This is to ensure that the risk is being borne fairly along the supply chain and that events of April 27th 2016 (essentially management decisions) are not pushed onto the farm producer.

MMM: What was the genesis of the code?
AJ: Events of April 27 2016 and the new legislation around Unfair contracts introduction on November 12 2016 is a prime opportunity to look at our industry and how businesses negotiate when entering into agreements.

MMM: What does the UDV hope will be included in the code?
AJ: The Code will include:

  • Greater transparency in contracts and supply agreements
  • Ensuring a pricing formula or mechanism is clearly defined within a contract
  • Ensuring pricing adjustments to farmers throughout a contract are clearly defined and that there will be no retrospectivity
  • Ensuring suppliers are given adequate notice if step-downs are to occur
  • Ensuring that farmers receive all payments accrued over the term of a contract
  • Ensuring processor exclusivity does not occur in cases where the processor has a contracted volume limit
  • Ensuring a clearly defined mechanism for giving notice of contract termination
  • Ensuring a clearly defined mechanism for modifying contract conditions, and giving farmers the right to negotiate variation

MMM: What does the UDV mean by: “Ensuring that farmers receive all payments accrued over the term of a contract”?
AJ: Farm businesses that have entered into milk supply agreements and contracts are entitled to the full value of milk they have supplied over that term of the supply period.

There needs to be more transparency around loyalty payments, quality bonuses and other price competitive hooks that effect the upfront weighted average but are not paid if you have ceased supply after the supply period has finished at 30th June. (In essence some companies have refused to pay these type of payments if people are not suppliers when the payment is made in July/August the in the new season.)

MMM: What impact would that have on flat milk and productivity incentives?
AJ: We are asking that the incentives paid reflect the true value of the milk to the market value of that milk. What we are proposing here, is to have the conversation as an industry to ensure that profitability/risk is discussed so that all can benefit in the long term.

MMM: Will transparency go beyond global trading conditions and reflect the unique product mixes of individual processors?
AJ: With the government committed to providing $2m for an Index or tools that provide market transparency, we are advocating for clearer market signals and the ability as an industry to have a process in place to question an anomaly in the market to minimise the events of April 27th 2016 happening again.

We are very keen to evolve the education of our industry to understand the global milk demand and supply tensions better. We also want to understand the true value of the commodities, the premiums that can be extracted from various product mixes and their markets and what these trends mean for Farm Gate Milk Prices.

Whichever processor a dairy farmer suppliers, we want them (the farmer) to be able to clearly see and understand how their milk price is set.

MMM: Who, other than processors, will have obligations under the code?
AJ: The obligations will be born by processors and farmers.

MMM: Which processors have agreed to be bound by the code?
AJ: The code is very much in a draft form and all the major processors have indicated that they would be keen to be involved in the working committee going forward.

MMM: Who will determine whether a processor has complied with the code?
AJ: The code being developed is voluntary is so that the industry can come together and discuss developments as the situation changes. The ACCC will look over the voluntary code but will not have enforceable powers. Some agricultural industries have developed mandatory codes and have proven to be inflexible when market and trading conditions change making the code more detrimental for competition for business to business negotiations.

MMM: The code is voluntary but will there be any sanctions if its terms are breached?
AJ: See above but in addition it could be assumed that if a processor breaches the terms of the code, industry organisations and possibly government and the general public would frown upon the processors actions and their reputation would be greatly damaged.

Also dairy farm businesses will have the ability to chose to supply a milk processor that has stated that it will abide by the code.

MMM: What is the timeframe for implementation of the code?
AJ: With the unfair contracts legislation coming into effect Nov 2016 and the ACCC investigative report to be delivered Nov 2017 there is commitment to begin work on the draft asap, but no time line has been given yet.

MMM: What else is needed beyond the code?
AJ: A vision for the Australian dairy industry the allows the industry to come together to ensure that we can build resilient farm businesses of the future to sustainably compete in a very volatile competitive market place.

We are going to advocate strongly to include all elements discussed in the press release including transparency around milk commodity forecasting. The ability for poor management decisions to be pushed down the supply chain to be borne by farmers is unacceptable and anti-competitive. We therefore need to develop a system where the farm businesses have plenty of opportunity to adjust their businesses when pricing signals are to change.

The feeling amongst the farmer organisations is that, if processors can’t be confident in the market, then they should not be punting with the milk price. Setting opening milk price is not a game. Therefore, we are advocating for stronger reflection of the market milk price to the on farm milk price.

Thanks again to Adam Jenkins for answering Milk Maid Marian’s questions.


Filed under Farm

Meet the commercial cow challenger

Every cow is beautiful in her own way. Strong and dignified, yet warm and nurturing, it’s hard not to fall in love. But some cows are just more beautiful than others. Red, for example, is one of our favourites.


Red as a yearling (teenager)

She’s a lovely quiet heifer with a very nice udder that milks out easily and Red has had no health issues since she joined the herd. Plus, there’s the X factor. Red is one of the first naturally polled (hornless) calves born on the farm and she was sired by a Holstein bull carrying a recessive red gene. No other cow in the herd looks anything like her, so you can see her from a mile away.

But does all that add up to a winning cow? To find out, we have entered Red in the local Commercial Dairy Cow Challenge. (If you live nearby me and want to enter too, you’d better get onto it now because entries close on Wednesday! The cows are judged on farm and there’s no need to wash, clip or shine the cows, so get onto it!)

I invited the Challenge’s chief steward, Aaron Thomas, who knows a thing or two about cow contests to help me scout for talent amongst the herd.

The cow’s milk production prowess is not considered by the Challenge judges – it’s all about the way the cow is put together. Even so, this is no mere beauty contest. All the elements that make a cow look good have long-term health benefits.

I asked Aaron to offer a quick appraisal of Red’s redeeming features and to identify some of his own favourites. Next, we did something decidedly silly and sought out our ugliest cow so Aaron could explain why ugliness is a health hazard for dairy cows. I videoed his appraisal of both cows. Poor Aaron. I suspect it may have been physically painful to discuss the poor second girl in detail.

Anyhow, the good news is that sentimental favourite Red and four of her herd mates are in the Challenge thanks to Aaron’s expert eye and encouragement! There are different classes for cows of all ages and the judge will visit the farm next week to assess the fab five. Fingers crossed!


Filed under Cows, Farm

Planning for life at the end of the tunnel


It’s all been about survival for an exhaustingly long time but, now, I’m focused on life at the end of the tunnel.

Oddly enough, an hour of my time spent answering a researcher’s questions about the way we feed our cows was more valuable than any length of time spent on a red velvet couch. It reminded me of our goals, how far we have come and, most importantly, that I have not given up and we are still making progress. Even this year.

As much as my wheezing body will allow, I’m pounding away at the keyboard and in the paddocks working on survival but edging towards something far better. Although my old uni lecturers would decry the haziness of our goals they are crystal clear to me:

  • less stress
  • more time together

What’s needed?

  • greater profitability, so we are less tied to our work
  • greater resilience in the face of increasingly unpredictable seasons and milk price

We have a three-pronged strategy to achieve those lofty aims, all supported with specific, measurable, achievable, realistic and timely objectives neatly laid out in a proper business plan. It’s an invaluable little sheaf of papers that’s proven priceless in a year when it all seemed pointless.

I’ve learnt an important lesson: when you’ve got your head down, it’s more important than ever to look up and keep your eyes fixed on the horizon.

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Filed under Farm, People

The dairy advocacy mess


At about the same time as The Weekly Times ran a scathing story claiming conflicts of interest in dairy advocacy, I’d been having a chat with a townie friend.

Friend: “Sorry you are going through such a tough time. Is the dairy industry running an advocacy campaign?”

Me: “No. Well, yes. Actually, not really.”

Friend: “Pardon?”

Me: “Well, Dairy Australia, the people with the money and the smarts aren’t allowed to spend it on stuff like thanking consumers for paying a fair price for milk, butter and cheese.”

Friend: “Why not?”

Me: “Because the money farmers give them to promote dairy is matched by government, so that means they can’t say anything that might seem political, like ‘thank you for caring’ or ‘dollar milk has to stop’.”

Friend: “But isn’t that what Barnaby Joyce said?”

Me: “Yes, but…I don’t know…”

Friend: “There must be a union or some sort of professional body that can run an advocacy campaign?”

Me: “Yeah, there’s the UDV, the VFF and the ADF. The UDV has been trying really hard but most of its money goes to the VFF and the ADF. The VFF is ‘in a relationship’ with Coles, the people who started the dollar milk thing. Meanwhile, the ADF has been busy with personnel changes and we have to remember that a big chunk of its money comes from the processors.”

Friend: “That’s a relief then because obviously the processors will want to sell more of their own branded milk at a fair price.”

Me: “Umm, the biggest processor’s chairman wrote a letter to all the papers supporting discounted milk.”

Friend: “Hang on, what did you say?”

Me: “Evidently, there isn’t enough money in the supply chain to pay farmers properly but if you make milk cheaper and still sell the same amount, that makes all the difference.”

Friend: “To who?”

Me: “I don’t know – that’s strictly between the processor and the supermarket – nothing to do with farmers at all. They’ll let us know if there’s anything left over. And if there isn’t, there’s sure to be some kind of support ‘not-a-loan’ loan for us.”

Friend: “How very reassuring.”

Me: “Indeed.”

Friend: “Well, if you’re not happy about it, why don’t you put up your hand to help change things?”

Me: “Look, I’m an average dairy farmer. I’ve got two young children, a farm that’s still being redeveloped, plus the off-farm work. I can’t fit in policy meetings as well. Besides, have you seen the way people like me treat our farm leaders on social media? Who’d volunteer for that?”

Friend: “See what you mean. So the people who are doing it?”

Me: “Got to be game as Ned Kelly, have the hide of a crocodile and a heart of gold to do it and do it well. There just aren’t many of those characters left.”


Filed under Farm

Grateful as the farm stops for no woman


Today is a day of triumph. It’s school holidays, breeding is in full swing, cows are on their way to market, the farm is a patchwork of ploughed paddocks and I have barely left the couch during the last two weeks. Until today, that is, when I made a shaky trip down to the flats with the kids to see the cows.

Pneumonia that didn’t respond to the first two rounds of antibiotics left me a teary mess, too weak to reach the washing line. After every test known to womankind at the emergency department and an extra set of different antibiotics, I reckon I’ve turned the corner.

In the meantime, Wayne has worked extra bloody hard on the farm and at home. A friend has had little Alex over for a play date and invited him for another. Our agronomist, Scott Travers, and cropping contractor, Wayne Bowden, have worked together to get summer crops in the ground despite their dizzy client. I am very lucky and grateful.


With 21mm of soaking rain just a couple of days ago, the paddocks are roaring into Spring and the smell of freshly turned soil is intoxicating.

Even so, the highlight of the morning was time spent amongst the milkers.  Most of the cows have shed their shaggy winter coats and are blooming with health.


The kids and I watched as a group of cows swirled in excitement. Swishing their tails, sniffing, pushing, mounting each other, the “hotties” of the paddock were unmistakable.


Zoe and Alex were dispatched to capture their numbers while I sat, propped up like a rag doll, against an old home-made water trough. I wrote down the numbers they shouted, messaged them off to Wayne, who will find them a mate them in the morning. Everything is literally buzzing, croaking and heaving with life.

The farm waits for no woman. What a glorious place to be.



Filed under Family and parenting, Farm