How to grow Aussie dairy: vertical and horizontal integration

In last week’s post about what it will take to encourage dairy farmers to grow, I promised to follow up with some ideas. The first is a guest post from Ian Macallan, a project strategist and business architect who has operated in the Asia Pacific for over 30 years across a number of industries including dairy.

Whilst 97 per cent of Australian dairy farms are family-owned, there are smatterings of “corporate farming” that bring together large parcels of land and cows.

If left unchecked, this type of pure farm aggregation could swing to the extreme of looking like feudal farming, leaving no capacity for family dairy farming. These corporate farms are also still vulnerable to milk price fluctuations.
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What it will take to encourage dairy farmers to grow

The much lamented stagnant Australian milk pond

The much lamented stagnant Australian milk pond

Consider this entreaty from the charming Lino Saputo Jr, who is the newish owner of Warrnambool Cheese & Butter:

“…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.”

“What we are trying to do in Australia is appeal to the dairy farmers and say, ‘Look, we can be a good home for your milk. If you choose to increase your herd size and you’re producing more milk, we will put on the infrastructure to process that milk’.”

Lino’s not alone. Many of the processors including our own co-op, MG, would like to see Australian dairy farmers arise from our slumber and produce more, more, more. Why, the industry even commissioned the Horizon 2020 Report last year to work out why we are so sluggish.

But even a simple dairy farmer can sum it up in two words: Continue reading

What inspires a young man to become a dairy farmer?

We received an unusual phone call the other week. A vet student with no family connections to dairy, Andrew Dallimore rang out of the blue saying he was keen to become a dairy farmer and wondered if he could ask us a few questions.

Well, what a series of questions! What were the challenges we faced becoming dairy farmers, why did we choose it, the ups and downs, where we look for knowledge and what are the pros and cons of raising children on a farm? At least, these are the ones I remember. And he took notes.

It felt like being at confessional, somehow. You have to be totally honest with someone so earnestly and diligently researching his future. Wayne and I were both immensely impressed, then gobsmacked when he offered to do a few hours work on the farm with the payment of just our thoughts and a banana!

Later, I had a look at the extraordinary “project” Andrew undertook last year and was impressed all over again. Andrew is a truly remarkable Australian so I was very pleased when he agreed to write a guest post about what inspires him to become a dairy farmer. Maybe we can learn a little about how to attract other young Aussies to follow in his footsteps. If you’re on Twitter, follow Andrew on @Farmer_vet.

Aspiring dairy farmer, Andrew Dallimore

Aspiring dairy farmer, Andrew Dallimore

I admit, that when Marian asked me if I would like to write a post for her blog that I was flattered, albeit worried. If you’ve read any of the content on here, you’ll realise that she is a bit of a bright spark (not that she’ll admit it). So hopefully I don’t kill too many of your brain cells (with my drivel) that you have spent so much time refining.

As a vet student at the University of Melbourne I have had the privilege to visit many different agricultural enterprises. Yet, dairy farmers and their families standout as some of the most inspiring people in Australia. It’s not their dashing flannelette shirts, crap splattered wellies, or even their everlasting pursuit to race the sun up every morning (and beat it!), but something else extraordinary.

Over the past 3 months I have been on a pilgrimage of sorts. I’ve been hunting down dairy farmers to hear about their pathway to farming. I feel inextricably drawn to dairy, and I’ve found these people are to be tough, dedicated, and generous beyond measure. Without knowing me from a bar of soap, dairy farmers have welcomed me into their homes, sat down and had targeted chinwags with me, and treated me as an equal while their kids watched telly, ate their tea, or just run amok.

Any question I had, as basic as it was, they answered and discussed enthusiastically. Eagerly, I listened to the trials and triumphs they went through to be successful while working, raising a family, settling into a completely different lifestyle, or turning a rundown farm into a thriving business and family home. From inherited farms, to sea-changers, and sharefarmers, they all shared similar traits. The stories were incredible.

For example, on a farm I visited up in northern Victoria I was completely blown away. A family of four milking about 300 cows on an inherited farm, with grins bigger than you can measure were some of the most astounding farmers I had met. It wasn’t the adults (who were the typical intelligent, driven, and happy dairy farmers), but the kids!

At the ripe old age of 14 their son had well over $10K in his bank from selling cow poo by the roadside, a part-time employee who helped him bag up the stuff (one of the kids from school, who unfortunately got the sack after his 3rd warning for not filling up the sacks properly), and a brilliant work ethic. His younger sister, at age 11, was being given orphaned merino lambs to her by farmers (otherwise the poor little buggers usually die in the paddock), was rearing them at home, and then selling them back to the farmers for a good profit.

These kids had impeccable manners, were bright, charismatic, and treated people as respectful equals.

Hearing and reading about people’s pathways to dairy farming has made me realise something incredible. Dairy farming isn’t just a way of life; it is life itself. It is survival by learning, adapting, producing, recycling, cooperating, and teaching on a day-to-day basis.

It is working with spectacular animals to feed the world sustainably, and support Australia. It is about raising a strong, healthy, intelligent, and generous family with humane ethics and values. There are few causes in our country that are greater than these.

Marian asked me what inspired to me start pursuing a life in dairy, and the answer is simple: Dairy farmers.

Marian also asked me what my dream is, and this answer more complex: I want to own and run my own rural veterinary practice; help run a dairy farm; heavily invest in the community I live with; and raise a strong, healthy, intelligent, and generous family on the land.

How I will get there on the other hand, is another question altogether… Hopefully with a large smile, a strong work ethic, good mentors, a little time, and plenty of elbow grease!

At least one dairy farmer won’t mind the summer heat

Bogged on the first day of summer

Bogged on the first day of summer

Wayne has a reputation for getting stuck and he’s outdone himself this year by bogging a quad bike on the first day of summer. Worse, he left his helmet at the scene of the crime and by the time the kids and I came to the rescue, his gear had been given a beating by the local hoons.

Cows may be vegetarians but don’t for a minute think that this in itself bestows innocence. They are merciless with unattended vehicles. This time the helmet, fuel breather line and rubber boot for the brake assembly were squelched deep into the quagmire but I’ve seen much worse.

In fact, a local fencing guy swears one (or maybe a gang) of our “ladies” opened his ute door and took off with his cheese and Vegemite sandwiches, leaving only a trail of slobber on the gearstick and driver’s seat.

Moral of the story: never leave valuables in sight or your vehicle unlocked.

Milk Maid in WCB wonderland as Saputo offers $8

Well, I wonder what MG will do now? And where will it end? Judging by the email I just got from MG, the co-op’s going to sit on its hands and hope the FIRB undermines Saputo’s bid.

“Murray Goulburn (MG) notes the revised conditional offer by Saputo for Warrnambool Cheese and Butter (WCB) announced today.”

“MG notes that Saputo’s offer continues to be subject to substantial conditionality. MG believes that resolution of the future ownership of WCB will be a long process and that WCB shareholders should not act prematurely in relation to giving up control of their shareholdings.

“MG remains committed to acquiring WCB and to satisfying all conditions associated with its offer as quickly as possible. MG presently owns 17.7% of WCB.

“MG believes it to be reasonable and in the national interest that Saputo’s Foreign Investment Review Board (FIRB) application to acquire WCB is not resolved until the public benefits of MG’s proposed acquisition of WCB have been given full consideration – pursuant to MG’s application for authorisation to the Australian Competition Tribunal to acquire WCB.

“MG considers its offer will bring many benefits for WCB shareholders, WCB suppliers, the Warrnambool community and the Australian dairy industry.”

But if push comes to shove, will MG go higher than $8?

I do understand the reasoning behind the co-op’s drive to acquire WCB for all the reasons outlined by Gary Helou when interviewed by the Australian Financial Review the other day (the video is very, very interesting). The WCB bid is important because it allows MG to grow quickly and achieve efficiencies similar to that of its giant Kiwi rival, Fonterra. Those efficiencies should mean better margins, which the coop would pass back to farmers.

On the other hand, it does make me feel like Alice in Wonderland just a little. When MG last launched a takeover bid for WCB in 2010, the price was $4.35 and WCB hasn’t suddenly hit the jackpot – its profits have fallen.

On the farm, we are in recovery mode from a year when the average Gippsland dairy farmer lost a lot of money. As the Dairy Industry Farm Monitor results 2012-13 showed:

“In what was a difficult year for many Gippsland farmers, average return on assets fell to -0.2% with average whole farm earnings before interest and tax down 82% to $37,609.  The average return on equity for Gippsland farms was -6.2% with average net farm income across the region reported at -$58,784. This performance impacts on the decision making ability of farmers in 2013-14.” 

The difference, says Helou, is that demand for milk is growing by 6 per cent while supply is growing at 2 per cent. If this is more than just a blip and a long-term trend, why wasn’t this foreseen three years ago? Curiouser and curiouser. Please forgive me for being a little confused.

What would Dad think of the farm?

It’s at family occasions like Easter that I think of Dad most often.

Dad died at Christmas-time in 2006 when Zoe was just six months old. A new mum with a thriving micro-business and a husband from the city, I had to decide whether I would take on the family farm. Michael, the wise local accountant, advised to sell – I was doing well, farms are far from the most lucrative investment choice and why work so hard, anyhow? After all, my parents had invested in a great education so I didn’t have to be a farmer.

But I love the place. And the cows. And fresh air and the contentment that sore muscles bring. Even though I thoroughly enjoyed my career, a working life spent wholly indoors would be unimaginable. When I said I just couldn’t bear to lose the farm, Michael clicked his tongue, shook his head and said, “Well, don’t say I didn’t warn you”.

Michael was right, of course. It’s been a tough few years. The farm was run down and it’s taken a mighty effort to restore it to manageability, so now and then, I like to imagine what Dad would say if he could see it now.

With a lot of help, we’ve removed tonnes of old stuff, repaired kilometres of fencing, renewed kilometres more of the water system, installed 21 new troughs and a couple of water tanks, renovated 200 hectares of pasture and planted 8000 trees.

I thought I’d take a few photos to remind myself how far we’d come and discovered something humbling. For all we have achieved, it was Dad’s accomplishments that stole the show.

Dad planted the tall trees in 1999. The small ones went in two years ago.

Dad planted the tall trees in 1999. The small ones went in two years ago.

Dad built this wildlife haven in 1984 and planted the trees

Dad built this wildlife haven in 1984 and planted the trees

This is what would have taken Dad's breath away

This is what would have taken Dad’s breath away

What does the missing dairy farmer look like?

Shi#t

Shi#t

This is the shirt that had to be left on the lawn because it was too dirty for the laundry. Check out the collar. He was wearing it when it became…soiled. Imagine the man.

Me: “So, who got you? Was it 1257 or 800?”

Him: “I don’t know – it was too quick, I was blinded and they were firing at me from all directions – in front and behind.”

Me: (Trying desperately not to laugh) “What did you do?”

Him: “I groped about and found something really thick and thought, ‘Great, that’s a hose’ and just blasted myself with the fire hose for a few minutes. And a few minutes later, another one got me from behind and it flowed down over my eyes before I could stop it, so I don’t know who that was either.”

Me: “Oh, you poor thing. But you seem in good spirits…”

Him: “Yeah. I decided that s#$t happens, so I might as well just take a break and have a drink. I peeled off my shirt, hosed myself down again, had that drink, and milked like this.”

Me: “What – in the nude?”

Him: (Indignantly) “With my shorts and gumboots on! I added an apron when the tanker arrived in case I scared the driver.”

Me: Raucous laughter.

Him: “Feel my hair”

Me: “Ah, no thanks.”

Him: “Go on, feel it…Don’t look at me like that…Okay, smell it then.”

Me: “It smells like Ovaltine – go and have a shower, for goodness’ sake.”

Milking cows certainly has its moments and there were quite a few of those “moments” for Wayne because now that the grass has pretty much shrivelled up, the cows have been dining on a divine, juicy crop of rape and tender young millet. Never mind, it’ll settle in a day or two…

Cows grazing millet

They can barely walk because their pants are suddenly too tight

The dairy farmer’s calendar

Summer is the laziest time of year for a dairy farmer but when Wayne and I started writing a “to do” list yesterday, my head began to spin a little. Not satisfied with a mild head rush, I went on to draft a rough calendar:

The Annual Milk Maid’s To-Do List

Lazy Summer Days

  • Milk cows
  • Pay bills
  • Deal with crises (pump breakdowns are popular this season)
  • Begin drying cows off for their annual holiday
  • Make hay
  • Have we conserved enough fodder? Consider buying more
  • Begin feeding silage, crops and hay
  • Return cow effluent back to pastures
  • Spend a day changing rubberware in the dairy
  • Control blackberries
  • Vaccinations, drenching, branding, preg testing
  • Big maintenance projects (the stuff you put off the rest of the year)
  • Dream of the next Great Leap Forward

Autumn Anxieties

  • Milk cows
  • Pay bills
  • Deal with crises (milk quality issues popular this season)
  • Continue drying cows off for their annual holiday
  • Special feeding regime for expectant cows
  • Welcome and nurture new calves
  • Test soils for nutrient levels
  • Repair cow tracks
  • Sow new pastures
  • Fertilise pastures
  • Return cow effluent back to pastures
  • Chase revegetation grants and order trees
  • Maintenance
  • Still feeding silage and hay
  • Nude rain dancing in full swing

Winter Woes

  • Milk cows
  • Pay bills
  • Deal with crises (calving emergencies popular this season)
  • Welcome and nurture new calves
  • Fence and spray areas for revegetation
  • Spend a day changing rubberware in the dairy
  • Feed three groups of cows different rations
  • Mating program in full swing
  • Consider another drenching
  • Buy new gumboots and practise rain dancing in reverse
  • Redo budgets after milk factory announces opening price
  • Keep chin up

Supercharged Spring

  • Milk cows
  • Pay bills
  • Deal with crises (unpredictable weather popular this season)
  • Train the new members of the herd
  • Visit the accountant (and maybe the banker)
  • Fertilise, fertilise, fertilise
  • Vaccinate and wean calves
  • Thoroughly clean and disinfect the calf shed
  • Plant trees
  • Control thistles
  • Make silage
  • Sow summer crops
  • Make grass angels

I know I’ve missed stuff – lots of it – but it should give you an idea of what happens day-to-day and season-to-season on our very average Australian dairy farm. So, dear Reader, as we head into 2013, what do you want to know more about?

Sustainable dairy farming

Sustainability isn’t about the environment, animal welfare, profitability, business succession or manageability. For me, the definition of sustainability is all of them.

Australia’s dairy farmers are good at environmental sustainability – we are the front line environmentalists behind the Landcare movement. I like to think we are also exceptional when it comes to caring for our animals too. Profitability, not so good. Business succession, woeful. Manageability, well that’s debatable.

City friends think I live an idyllic life, frolicking among the cows but this lifestyle can bring stressors urban Australians would never imagine. According to the University of South Australia:

UniSA Psychology PhD student Alison Wallis knows what can drive a dairy farmer to cry over spilt milk.
For the past four years Wallis has been investigating the work stress of South Australia’s dairy farmers.
It’s a group she says at the time of the research had one of the highest incidences of work-related stress in the nation.
“There hasn’t been a lot of research done on the stress levels of those who are self-employed,” Wallis said.
“But we found that dairy farming produced some of the highest distress scores of many Australian occupations.”

Reading Tom Phillips’ excellent dairy blog, Pasture to Profit, I discovered we are not the only ones. Our trans-Tasman counterparts are also studying dairy farmer burnout.

It’s all amplified in times like these – when the rain won’t stop falling here in the south and when the prices won’t stop falling up there in New South Wales and Queensland – and so much of your success or failure seems to be in the laps of the gods (whether Thor or Coles).

On the other hand, it’s times like these that faith in human nature is restored by the generosity of people who care. People like Queensland ag teacher, Lisa Claessen, who, seeing the distress of her students, has taken to social media to petition the Coles CEO for a sustainable milk price. If you would rather not have UHT on your cornflakes, please add your name to her cause.

“MG understands dairy farming profitably…will be very challenging…”

Yesterday, Murray Goulburn Co-op, which buys and processes our milk announced how much we will be paid from next week. It equates to roughly 33 cents per litre.

In the letter announcing the farm-gate milk price, Murray Goulburn CEO, Gary Helou, writes:

“MG understands that dairy farming profitably at these opening and forecast prices will be very challenging
and we will do everything possible to increase farmgate returns in the short and long term.”

I appreciate Mr Helou’s frankness but, to be honest, it sent shivers up my spine. It reminded me of 2009, when it was clear that no matter how long, hard or smart we worked, we would lose money. In fact, the average dairy farmer took on $220,000 extra debt. This year, it looks like we’ll lose about 3 cents for every litre of milk we supply. Ironically, that could mean we try to produce more milk in an attempt to offset our fixed costs or a lot less milk if we instead decide to sell cows. It will also mean I spend more time trying to earn an off-farm income to reduce the impact on our family.

This is essentially what makes dairy farming a very tricky business: we have one product that we sell to one customer at a price they set. No wonder we’re a resourceful bunch.