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.

Biosecurity dairy debacle: what farmers need to know

Forget mad cows, this time last week, the milk maid was practically frothing at the mouth. The MLA had told me there were new rules but – not to worry – just go ahead and break them.

Every time farmers sell cattle, we need to accompany them with National Vendor Declaration (NVD) forms. From October, those forms will include new sections on biosecurity and animal welfare.

We’re going to be selling cows again soon so I figured it was a good idea to get everything in order. I checked the NVD website auspiced by Meat and Livestock Australia (MLA) and did the education segments but still couldn’t work out what else I needed to do. So I rang the MLA’s helpline.

What a mistake that was. To cut a long story short, I was referred to the Animal Health Australia biosecurity plan template. Jeepers. Among the dozens of requirements appears to be the tracking of all movements across the property and decontamination of vehicles as they move from one “zone” to another.

Despite bearing the Australian Dairy Farmers logo, it’s totally impractical for most dairy farms. Implementing it in the two weeks before it came into force? Absolutely impossible.

When I asked what the implications were of failing to take the recommended actions, I was told that I didn’t need to prove I’d done any of it – after all, the chances I’d be audited were pretty remote, David, the MLA man added. Just tick the box declaring I had.  Righto. All fixed. Not.

When I rang last week, Dairy Australia said it was still working on a solution for dairy farmers. Now, thankfully, Dairy Australia’s manager of sustainability including food safety and integrity, Helen Dornom, has pulled off a minor miracle with this:

“Dairy farmers have been deemed to be LPA equivalent based on the dairy QA programs currently in place and underpinned by dairy licences and a legislated requirement for on-farm food safety programs.”

“As well, the dairy industry is developing a biosecurity app to provide dairy farmers with an easy to use program that will deliver a personalised biosecurity plan for each dairy farm. The LPA module provides a template for biosecurity plans, as does Animal Health Australia. 

“The LPA template is based on the AHA template – and designed to help all livestock producers provide evidence of implementing the biosecurity requirements. The dairy app will be more customised to individual dairy farms.

“The industry is also developing a monitoring program for Animal Health and Welfare practices and has provided all dairy farmers with a copy of the Animal Welfare Standards and Guidelines for dairy farmers – distributed through dairy companies at the end of 2014.”

“The key message for dairy farmers is that they are exempt from the need to undertake the LPA modules (although they can do them if they want to) – and short-term, do not need to take any action as they are deemed to be LPA accredited. Dairy farmers will also be exempt from LPA audits once the dairy farmer’s PIC is linked to his/her current dairy licence number.”

So, in other words, don’t call MLA when the time comes to send your cows to market. Don’t worry about the big pack of info on its way to your mailbox right now. Don’t bother going to any of those biosecurity sessions around the country. It’s all been rather like a scene from ABC’s Utopia.

Of course, if you have beef cattle on your property, too, then that’s another matter. Panic.

UPDATE 22/09/17: A series of emergency meetings has yielded this clarification for dairy farmers by the MLA: https://www.mla.com.au/meat-safety-and-traceability/red-meat-integrity-system/red-meat-integrity-systems-newsletter/what-the-changes-mean-for-dairy-farmers/

 

RUOK day and the SSM test for people like me

SSM

I tweeted yesterday that I had voted “yes” for same sex marriage because who others love is none of my business.

I am sure of that but I made the mistake of thinking the same sex marriage survey was all about LGTBI people. A call from another Gippsland dairy farmer set me straight. It’s about us.

Like gay and lesbian couples, dairy farmers are a minority group. When $1 milk arrived in 2011, I started this blog, frustrated that few Australians seemed to understand why it mattered; why we deserved a fair go.

But there is a difference. The bullying, abuse and vicious attacks LGBTI people often endure is foreign to me. On the contrary, ordinary Australians with no connection to farming whatsoever put their hands in their pockets to buy branded milk during the dairy crisis. Because they understood that everyone deserves a fair go.

The impact of the dairy crisis lingers but, today on RUOK Day, yes, I am okay. And, for that, I owe something to the support of everyday Australians who showed they cared.

The SSM survey cannot test the validity of anyone’s love. It is a test for ordinary Australians like me who expect a fair go. Will we rise to the challenge and return same the respect and tolerance for others that we demand for ourselves?

 

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.

Could this have been the wake-up call Aussie dairy needed?

bulllores

When the two biggest processors of Australia’s milk, Murray Goulburn and Fonterra, squandered the goodwill of farmers earlier this year, there was a sense they could do as they wished. They made the rules and broke them, too.

One executive told me there was no risk of supply loss following the drastic price cuts, saying, “After all, where would they (farmer suppliers) go?”.

How things have changed. Both the big processors have watched milk supply evaporate and, with the dawning realisation that something had to be done to avoid the death spiral outlined here and detailed by MG’s own advisors, Grant Samuel, both have responded.

After suspending the MSSP while reducing the forecast close by about the same amount a week earlier, MG made amends with a step-up the day before its AGM.

In his AGM address, MG chairman Phil Tracy acknowledged farmers’ pain and offered an apology of sorts.

“While as a Board, we did what we could with the information that we had at the time, we know that the outcomes of that period have been devastating for suppliers and for that we are deeply sorry.” – Phil Tracy, MG Chairman

Like MG, Fonterra Australia has announced it is reviewing the way farmers are paid for milk in order to avoid a repeat of the May debacle. Farmers whose milk production peaked in May and June were initially singled out for a thumping, causing many to sell off cows, only for Fonterra to back-track days later and spread the pain of its price cut more evenly among suppliers.

Despite poaching 200 million litres of milk from MG, Fonterra Australia’s supply remained fragile, due to the tricky season, the low milk price and the damage done in May to autumn-calving regions. Hours after MG announced its step-up, Fonterra came out with its own, much larger (and incredibly welcome), price increase.

The size of the step-up challenged the oft-held belief that Fonterra only pays the price it needs to in order to prevent supply loss to MG. With profitability restored, perhaps Fonterra has indeed extended its co-operative spirit to this side of the Tasman. On the other hand, Fonterra’s announcement provided a hint that perhaps it was essential to fill under-utilised stainless steel:

“The last six months have been challenging for all of you, and we know that spring is critical to optimise production.” – Matt Watt, Fonterra Australia

No matter what the motivation, it’s enormously heartening to see the two biggest processors act and act so positively. Maybe this is the wake-up call Australian dairy had to have. It might even help to rekindle the traditional sense of partnership between farmer and factory that had been on the wane for so long.

What’s certain is that farmers – and their supply of milk – can no longer be taken for granted. Loyalties have been stretched or broken and farmers who have now experienced how easy and rewarding it can be to shift their supply may well be tempted to do so again.

In return, expect processors to lock in a broader range of “desirable” supply with more special deals and contracts. Be careful what you sign. I’m tipping the unfair contract law that came into force quietly this weekend will be more important for dairy farmers than legislators could have imagined.

Why I welcomed Four Corners to our dairy

I’m looking forward to watching Four Corners tonight with all the enthusiasm of a patient awaiting the lancing of a boil. Will it be fun? No. Will it be good for me? I guess so.

It’s almost four months since Murray Goulburn called a trading halt, followed by the infamous “clawbacks” of both MG and Fonterra that rocked the dairy community.

In a state of confusion and panic, farmers called out for help. Ordinary Australians did what they could, ditching cheap unbranded milk in a show of solidarity with farmers that continues to hearten.

Four months on, panic has given way to a sense of aimlessness and loss. Helou and Tracy’s vision had offered a shining path towards security and prosperity but now Gary the Great has vanished and nobody has filled the role of white knight. Leadership is lacking at the time we need it most.

We farmers have a fleeting once-in-a-lifetime chance to fix things. Politicians want to know how they can help but we don’t seem to be able to articulate a coherent answer other than to cry for something, anything, to dull the pain.

Meanwhile, there’s a puerile optimism amongst some elites, reckoning that every casualty improves the prospects of the survivors. It’s a sentiment that disgusts me and simply doesn’t stack up.

Floods of milk generated by the powerhouses of Europe, NZ and the USA sink or float the export market – not the farm next door. We’ve already lost thousands of Aussie dairy farmers since deregulation. More of the same won’t solve our problems.

The first step towards a cure is to work out exactly what ails us and, at the moment, all we’re doing is bandaiding a festering sore. If there’s anybody who can sniff out and lance a boil, it’s Four Corners.

That’s why we welcomed Deb Whitmont and her team to our farm. Sure, I’ll be cringing on the couch but Four Corners’ Milked Dry might just reveal the bitter pill we need to swallow.

 

 

 

 

 

Why don’t dairy farmers just…?

Comment

Of course, Mike is right. You can’t walk into a shop and demand a box of cornflakes at a fraction of the cost.

You can’t cut someone’s wage because your business is losing money. Nor can farmers choose to pay less for stockfeed, electricity or shire rates just because the price of milk has fallen.

We dairy farmers are in a uniquely vulnerable position. We shoulder almost the entire risk in the dairy supply chain. It stinks. It’s grossly unfair. And when you read stories like Appreciating Australian Agriculture‘s below, it’s harrowing, too.

 

AppreciatingAusAg

So, if we have both guts and brains, why do we let others set the price for our milk? The reality is that dairy farmers have little choice in the matter.

Why not stop sending milk? You cannot switch cows on and off. You have to milk them every day, no matter what, and their milk needs to be sold within two days. It can’t be stockpiled until buyers offer a reasonable price. Of course, you could sell all your cows but then how would you pay your mortgage?

Why not find a buyer who will pay more? Because there are only a handful of buyers and they all offer about the same deal. They tell you the price of your milk. If their sales strategy goes sour, you get paid less. Anyhow, right now, few milk processors around here are willing to take on new farmers. You’re stuck right where you are.

Why not sell the milk direct? Yes, a few farmers do. It costs a six-figure sum to set up a processing plant and takes about a year to get it approved by the regulators. Running that plant and marketing your dairy products is another full-time job on top of dairy farming. It’s also another completely new skill set. In any case, not many farmers have deep enough pockets to establish the plant and endure the inevitable losses during the time it takes to become commercially successful.

Why not just sell the farm and do something else? Well, that’s a question plenty of farmers are asking, too, but it can take years to sell a farm and we do it because we are good at it and we love being farmers.

The reality is that when a few thousand small family businesses sell a highly perishable commodity to a handful of very large corporations, the playing field is anything but even.

 

Despair, anger, disbelief.

3wisecowspsycho

Lots of dairy farmers are naturally cynical and, let’s face it, we’re never entirely happy with the weather forecast. But we are optimists at heart because things will always be better next season.

Not this season.

I have never seen my fellow dairy farmers so subdued as they were at a meeting last night. Dinner at the local pub was laid on – a rarity that normally guarantees a festive mood – but somehow it felt like more like a last supper. Nor have I seen such anger online.

Partly, I think, it comes down to being battle-weary. Around here, it’s been a disastrous season. Dry-land farmers have not been able to grow grass and the La Nina we were hoping for still hasn’t arrived. By now, we should be building a wedge of grass to get the cows through winter. Instead, paddocks are eaten to the boards while farmers wait for resown paddocks to fire up.

The conventional wisdom is to apply nitrogen now while the soil’s still warm enough to grow grass. Many farmers at last night’s meeting had not applied any urea yet despite its unusually attractive cost this year because the soil is still too dry.

We can buy in more fodder or sell more cows. Fodder is getting hard to find and expensive, too. Many of us have already culled hard. The options are narrowing. We need something to go right.

It isn’t. Farmers seem sure that the milk price for 16/17 won’t be good. Will it be devastating? We’re all wondering and worrying.

On top of all this came the Murray Goulburn announcement that it had overspent this year and will have to claw money back from farmers for the next three years. None of it makes sense. Many farmers had hailed the MG plan as visionary, something that would transform our industry to create sustainable prosperity. But the loss of so much money in so little time is incomprehensible.

It’s a blow from left field that will leave barely a Victorian dairy farmer untouched. MG is the pacemaker for the entire industry. Processing half our state’s milk and 38% of Australia’s, it sets the benchmark for the southern farmgate milk price. When it falters, we all do.

In the face of all this, the message from last night’s speaker was simple: seek help, watch out for your neighbours and don’t lose sight of the vision for your farm. Good advice.

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.

 

 

The freedom to be a cow

It’s not just Cheeky Girl who magically appears out of nowhere. I had to go down to the paddock after milking to check on the cows and found myself being stalked by a tall, dark stranger.

It’s a lot of fun just sitting, watching the cows. Real individuals, some are curious, some are timid, some haughty but, without exception, dignified.

There’s a fine balance in our interactions. Yes, we milk the cows but it is they who dictate the flow of our days, months and lives. Everything from wedding dates to annual holidays are chosen to avoid calving season, a time when all hands are focused on the safe arrival of the next generation.

Continue reading