ADF answers questions about the dairy code

Australia’s peak dairy representative body, Australian Dairy Farmers (ADF), has not yet joined the ACCC and all but one of the state dairy bodies in calling for a mandatory code that would govern the interactions between farmers and processors.

I’m grateful to ADF’s President, Terry Richardson, for answering four questions about the ADF’s approach for Milk Maid Marian.

Terry Richardson2lores

Terry Richardson, ADF president

1. Does the ADF accept the ACCC’s finding that the voluntary code was not effective enough?
TR: ADF accepts the ACCC findings that the current industry Code had a positive impact on contracting practices but has been unable to secure participation by all processors, reduce risk and strengthen bargaining power for farmers, independently arbitrate complaints or penalise breaches.

When the Code was introduced, it was agreed that a review would occur twelve months of operation. This included an assessment of its strengths and weaknesses in the context of the ACCC report and industry feedback.

We were aware at the start of the code review process that the next version of the industry Code must have such procedures in place.

It is important to recognise that prior to 1 July 2017, there was no Code of Practice for Contractual Arrangements in the dairy industry, and Australian Dairy Farmers was pivotal in making this difficult yet important first step.

2. If you are still committed to the review of the voluntary code, what resources does ADF have that were unavailable to the ACCC and may have hindered its review?
TR: It is incorrect to assume that the ADIC is conducting its own review with the aim of coming to a different conclusion to the ACCC. The ACCC and ADIC reviews have different objectives.

The ADIC review is focused entirely on how the voluntary code operated, what elements were successful and what needs improving in a new Code of Practice.

We found that relatively little of the ACCC report considered the operation of the current dairy industry Code of Practice despite the shortcomings.

Our concern with the ACCC report was that in recommending a mandatory code of practice, the ACCC did not conduct an assessment against the Australian Government’s threshold test nor did it provide adequate analysis on how this new code would operate.

It is our understanding that it is difficult to amend or alter a mandatory code once it is enacted if farmers determine at some future time that they are unhappy with its operation.

It has been incorrectly assumed that continuing with the ADIC review is an indication that the Council or ADF is opposed to a mandatory code of practice. That is not true.

The ACCC report broadly discussed the different types of codes but we need to review all options and communicate to farmers the benefits and shortcomings of each.

These are significant decisions for the dairy industry and farmers should expect that ADF forms a view that is underpinned by detailed analysis

3. What steps has the ADF taken in response to the ACCC report?
TR: ADF, in conjunction with the Australian Dairy Industry Council, is using the ACCC report as a springboard to revise and strengthen the Code of Practice and act on the other recommendations contained in the report.

We are working with a legal firm who has considerable experience in working with industry codes. While this legal advice is in its early stages, we will work through number of key amendments that should be included in a new dairy industry code, including a dispute resolution mechanism and penalties procedure that would ensure compliance.

We are also using the ACCC Guide to Industry Codes of Practice to ensure a strengthened code is consistent with best practice.

4. What are the next steps and their timeframes?
TR: The introduction of a Mandatory Code would take 15-18 months, and with a federal election scheduled for the first half of 2019, this timeline could be extended as government moves into caretaker mode during an election.

Preparing a strengthened industry Code including dispute resolution procedures is the next step, and we expect this to be complete in the next couple of months.

This work is complex and ADF is proceeding one step at a time, recognising the urgency of moving this work forward.

Thank you, Terry Richardson, for explaining ADF’s approach to a dairy code!

Dairy love and why it’s lacking on St Valentine’s

“Imagine you decided to stay and defend your home from a bushfire, while your neighbour flees.”

“You save your home but the mental scars are deep.”

“Your neighbour’s place is burnt to the ground and sympathy floods in for the family and, in time, they move into a beautiful new home.”

This was the scenario clinical psychologist Rob Gordon put to me explaining why rifts often open in any community after a disaster. He pointed out that because everyone’s experience of a disaster is different, misunderstanding and resentment brew under the pressure of recovery.

I’ve seen it in dairy social media forums. While thousands of farmers are finding ways to support each other on forums like the Show Some Dairy Love Facebook page, there are some cranksters out there who need to kick heads.

I’ve felt the heat of that anger first-hand, ironically from a non-farmer, who says I was one of those with a secretive “special deal” shielded from the infamous claw-back, accusing me of having no morals.

The truth is that, in May 2015, I had chosen to sign up for one of Fonterra’s “risk management products” available to all suppliers. It meant the price for 70 per cent of our milk during the 15/16 financial year bobbed about in a range with upper and lower limits.

Sure, we would have missed out badly if prices did get to MG’s much-vaunted $6.05kgMS forecast close but it felt like good insurance.

When Fonterra cut its price in May 2016, the price for 70 per cent of our milk dropped to its floor. The remaining 30 per cent tumbled the whole way down.

Lots of people were much worse off than we were. Others were much better off.

That’s the thing. Just like a bushfire, the milk crisis has affected everyone differently. So many factors come into play, like:

  • the size of your farm,
  • the time of year your cows calve,
  • which processor your farm supplies,
  • whether you have/had a contract, and
  • which stage your business is at.

On top of all this, there is loyalty and trust.

Hundreds of farmers swapped processors for the first time in years or decades. For many, it was a matter of survival. Others have not been able to switch and some consider leaving the last big co-op nothing short of treacherous desertion.

Add to all this that farmers have now been battling to pay bills for 10 months (actually, a lot longer if you were in one of the drought-affected regions) and it’s not surprising that people are feeling rather cranky, to say the least.

To make matters worse, change for the better seems an aeon away. The senate, ACCC and ASIC inquiries have revealed little to date, other than that the unrepentant Helou had not been interrogated.

I’m spending St Valentine’s Day at the Gippsland ACCC farmers’ forum. I hope that out of this comes a bit of the dairy love we all need.

 

 

A quad bike helmet that really, truly works for dairy farmers

HQHelmet

This new helmet for quad-bike-riding farmers will save lives because it works. Not just because it’s tough and protective but because it’s not the sort of helmet you rip off as soon as you’re out of sight of the boss.

Most farmers refuse to wear helmets and I can understand why. I’ve tried wearing a road bike helmet (in line with official expectations) to bring the cows home on a sweltering Sunday afternoon. A road bike protects your head alright – that is, for the few minutes before heat exhaustion sets in.

Road bike helmets are made for riding motor bikes on a road, fast. Not at 2km/hr behind 250 cows, each throwing out the same body heat as a 1500kW hair dryer (I’m not joking, they do).

As a result, we’d decided to wear equestrian helmets compliant with AS/NZS 3838. Designed to protect a rider from a nasty fall at speed, they provide more protection than a pushbike helmet and better ventilation than a motor bike helmet.

Why hadn’t we chosen a helmet rated for agricultural quad bike use, you ask? Because there wasn’t one. New Zealand has developed such a standard – NZS 8600 All Terrain Vehicle Helmets – but, for reasons I can’t fathom, Australia has not adopted it or chosen to follow suit. Australian inspectors will still expect you to wear a road bike helmet, unless you can prove you have done a proper risk assessment.

Despite it all, the Quadbar people have finally designed and made a helmet especially for Australian farmers, the HQ Stockman 2. We were sent a complimentary sample helmet to test on the farm. Suffice to say, Wayne’s old equestrian helmet is gathering dust and we’ll be buying another Stockman.

The helmet is light and comfortable enough to forget you’re wearing it and the ventilation is just as good as the equestrian helmets we’ve been using.

Equestrian helmet (left) vs Stockman (right)

Equestrian helmet (left) vs Stockman (right)

What it has over the equestrian helmets is added protection. The HQ Stockman 2 meets NZS 8600 standard as recommended by both the Queensland and NSW coroners.

The helmet is so strong, it passes the test used to gauge the protectiveness of road bike helmets, although only based on one impact, rather than two, as Quadbar’s Dave Robertson explains:

“The ‘Impact energy attenuation test’ is the same test for the Australian motorcycle (and USA DOT motorcycle) standards however the test is repeated a second time on each location on the helmet for motorcycle helmets,” Mr Robertson said.

“Helmet expert, Dr Terry Smith form California USA, at the Qld coroner’s inquest went to a lot of trouble to explain that the second test is to ensure protection in a case where the ‘head strikes twice in the same location’ and MUST not be interpreted as providing double the protection. The speed impact is the same on both tests and the protection must be below 300g. The level of protection of a motorcycle helmet is in the fact that it can withstand a second impact on the same location on the helmet which is more likely at higher speeds. It (motorcycle helmet) is not tested at a higher speed than NZS 8600 however will most likely withstand multiple impacts.”

If you’re riding a quad on the farm without a helmet, get a Stockman. It’s the sort of helmet you forget to take off and it might just save your neck.

EDIT: A helmet compliant with NZS 8600 called the AgHat came on the market a couple of years ago but we didn’t adopt it at our farm because it had no ventilation.

Why I’m signing the Farmer’s Letter about climate change

The view from the house after the fire

The view from the house after the fire

Will you help me? Apparently, just before Australia goes to the Paris climate summit, proof is needed that real, live, everyday farmers want the government to do something about climate change.

According to today’s Sydney Morning Herald:

“A cabal of regional and rural Liberal members, centred in Western Australia and supported by a number of conservative MPs, will force a vote at Saturday’s federal council meeting in Melbourne on whether Parliament should “examine the evidence” around climate change before agreeing to any post-2020 emissions cuts.”

“Liberal sources told Fairfax Media that Environment Minister Greg Hunt is likely to be forced to step in and fight off the motion on Saturday by asserting the Abbott government accepts climate change is real and is willing to work with other nations to combat its effects.”

So, to show that farmers who want action are more than a figment of a latte-sipping lefty’s imagination, I’ve signed The Farmers’ Letter, which says simply:

“Aussie farmers are on the front line of rising temperatures and more extreme weather, so global warming is a priority issue for rural, regional and remote Australia. An ambitious target to cut carbon pollution, a transition plan away from coal and gas towards renewable energy, and a strong deal at the UN climate talks in Paris this December are all in the interests of Aussie farmers and our families.”

Dozens of farmers from across the country are joining me and I hope you will too, so that, like the Whos from Whoville, we can prove that we exist.

Noise

Perhaps climate change shifts are especially obvious to dairy farmers because these days, everything on a dairy farm is measured to the nth degree. We can tell you how many days it took for the cows to get in calf, how much grass we grew this week and how many litres of milk were made in the last 12 hours.

It’s a fact that less milk is made from listless cows in a heatwave and the cost of a litre of milk skyrockets during drought, fire or flood. And the locals are worried. Just as Alex was about to be born, I joined a meeting of dairy farmers in town to discuss what we could do to adapt to climate change.

I can’t tell you how impressed I was that individual farmers were already doing so much and were so hungry for more information. Four years on and I think it’s all become just another part of the way we farm around here.

But if we are really going to pass the farm on to the kids in a better state than we found it, we’d better make sure we are heard on climate change. Please, if the thought of doing nothing doesn’t sit well with you, visit www.farmerletter.org and show them you’re for real.

What climate change means at farm level

A photo by Heather Downing of the kids and me out on the farm for the Earth Hour cookbook, which appeared in The Age today

When journalist from The Age Liam Mannix asked me how climate change was affecting our farm, the answer was: in every possible way, beginning with the circle of life.

When I was a girl, we used to get the ute, the tractor and our gumboots bogged every winter. It rained and rained and rained and rained and…you get the picture. Well, not any more. With the odd exception, the winters are warmer and drier these days. Boggings are a rare novelty for my kids.

This has some real benefits. Warmer, drier winters are much easier on the cows, calves and the grass. Much easier on us, too (plugging through deep mud in horizontal rain is character-building stuff)! We can grow a lot more grass in winter and that’s fantastic.

Less than fantastic are the changing shoulders of the season – sprummer and autumn. Spring can come to an abrupt halt very early in November these days and we often wait much longer into autumn for rain.

Every rain-fed farmer like me tries to match the cow’s natural lactation curve with the grass’s growth. In fact, the amount of grass the cows harvest is the number one predictor of dairy farm profitability. So, looking at the new growth patterns, we took the plunge a few years ago and shifted the circle of life to match. Now, calves begin to arrive in early May rather than mid-July.

Our decision is backed by hard data. Dairy guru, Neil Lane, has researched local statistics and found that farms just 10 minutes away have seen falls in production of 1 tonne of dry matter per hectare and increasing risk around late spring and autumn. On our 200 hectare farm, that’s 200 tonnes every year valued at roughly $300 per tonne we lose. That’s a lot of ground to make up.

But all is not lost. Dairy farmers are adapting at break-neck speed. We are on the cusp of breeding cows that are more resilient to heat and, in the meantime, have a very well-practised regimen to protect our cows from heat stress.

We are growing different pasture species like cocksfoot, tall fescue and prairie grass with deep root systems to tap into subsoil moisture. Planting at least 1000 trees per year creates micro climates that shelter both our animals and our pastures.

All of this makes practical, business sense and it also helps me feel better about our children’s futures. We are doing something!

That’s why I agreed to talk to The Age for this article and why we were happy to be featured in the Earth Hour cookbook.
It’s thrilling to see the great stuff farmers across Australia are doing in response to climate change. Now, if we can communicate that to foodies and the animal welfare movement, just imagine the possibilities.

The Earth Hour cook book makes climate change matter to foodies

The Earth Hour cook book makes climate change matter to foodies

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).

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

“Bring on the cows” demands a new routine

“Bring on the cows” trumpets The Australian, headlining a story about MG Co-op managing director, Gary Helou. In response to rumours that the co-op might purchase a large Tasmanian dairy farm, Mr Helou reportedly says:

“We are not farmers; MG is a global dairy food processing and milk company, and we will not be buying farms directly; that is not our business,” Helou says adamantly.

“The only way to get extra cows and milk is to up the farm gate price enough that farmers will want to invest (in more cows) themselves. So that’s what I have set out to do, maximise the farm gate price and reduce the cost of processing and the supply chain and then efficient production will follow.”

Here’s the problem: MG is not a global dairy food processing and milk company. It is a co-operative of Australian dairy farmers who are members because they expect MG to, first and foremost, maximise their profitability. Not by investing in a processor (they could just buy ASX shares if that was what it was all about) but by looking after farmers directly.

They don’t just supply MG, it’s not just their MG, farmers ARE MG.

Am I being hopelessly idealistic? I don’t think so. This focus on being a processor has flowed through to the co-operative’s milk price system.

The final milk price only tells half the story. The quoted “average weighted” milk price is skewed to favour farms with flat production curves (mirroring those of the processor) at the cost of farms whose milk supply matches the natural ebb and flow of cow and pasture. For the vast majority of Australian dairy farmers, the way our co-operative pays us is at odds with efficient milk production.

MG must remember what being a cooperative really means before its farmers will be ready to “bring on the cows”.

The last time I applied for drought assistance

Jan25PanoramaLoRes

I was scared. The earth was scorched bare, cockchafers had decimated our paddocks and feed was at record prices. I’d been brought up on the land but was new to the experience of actually holding the reins.

I didn’t want to let my husband know how scared I was, either. He was new to farming altogether and we were betting everything we had on my skills, our sweat, the international commodity price cycle and the weather.

When we became eligible to apply for exceptional circumstances funding, I sought guidance from a Rural Financial Counsellor then locked myself in the office for two long days and sweated over the paperwork.

The first envelope in return said my application had been rejected because I was not a farmer. I was, and still am, earning some off-farm income to feed the family and the assessing officer had decided that, since I would naturally be working 38 hours a week in total, and I was clearly spending time non-farming, I was not farming at all. The reality was that I was working into the small hours to survive. After a lot of persuasion and quoting industry statistics, he conceded that, yes, perhaps I was a farmer.

The next envelope said my application had been rejected because our farm was unviable. He told me I had to show we could pay back all our loans in 10 years as well as achieving an 8% return on investment to prove my viability. My bank manager just laughed when I told him. “I don’t think of any of my clients could achieve all that,” he said.

I gave up.

Why am I telling you all this? Because there are a whole lot of people out there under the impression that drought aid is dished out like boiled lollies. Maybe I went about it the wrong way. Maybe I hit a particularly tough assessor having a tough time. But don’t tell me it’s easy pickings.

Nine tricky questions for MG, answered

Today, Murray Goulburn Co-op stepped up its offer for Warrnambool Cheese and Butter again, to a staggering $9.50 per share. In a year where most dairy farmers are still playing catch-up from a horror stretch, it’s no surprise that some of us are getting nervous about how the deal stacks up.

I wanted to put the top nine the questions I’ve heard from farmers to one of MG’s most senior people, general manager shareholder relations Robert Poole. His responses have just arrived. Let me know what you think!

1.    Where is the money for the bid coming from?

Murray Goulburn has committed financing facilities available from its existing lenders to fund the Offer.  A further $350 million of new facilities have been provided by National Australia Bank (NAB), Australia and New Zealand Banking Group (ANZ) and Westpac Banking Corporation (WBC) in order to finance the transaction and assume Warrnambool’s facilities to the extent required.  The support of the financiers in providing these facilities re-enforces Murray Goulburn’s views that the rationale and financial metrics implied by the offer are sensible.

It also confirms MG management and the Board’s view that the level of leverage in the business is appropriate for a co-operative structure particularly in its current phase of significant growth and investment.

2.    MG’s balance sheet is described by commentators as “over-stretched”. Gary Helou countered by saying cooperatives are different. In what way?

Our offer is financially prudent and has been well considered. Our gearing will increase to around 57.2% – a level that our Board is comfortable with taking into account that we are a 100% farmer controlled cooperative with a range of options. At the financial year just ended our gearing was 43%. Based on a successful transaction, our FY14 gearing is estimated to be around 57%.

Co-ops are generally well supported by banks and this is the case with MG. Our bid for WCB is fully funded by NAB, Westpac and ANZ. Co-ops are not listed and are backed by their farmer suppliers. The capacity of the co-op model to sustain debt is well established and is evidenced by offshore examples most recently and notably Fonterra prior to their raising of non-voting equity capital. Co-ops traditionally have a higher level of debt. For example, Fonterra reached gearing levels of over 60% during growth phases.

3.    How can you justify paying so much more than WCB’s stated “fair value”?

MG has carefully assessed the value of WCB, and our Offer is financially prudent and well considered. MG would NOT proceed with any bid unless the result added to the overall milk price and our analysis shows that a combination of WCB and MG will do just that.

This is an extremely complex and ever changing situation. However what is clear is that the industry needs consolidation to improve the efficiency of the supply chain and create a larger scale globally relevant Australian dairy food company, uniquely positioned to capture the unfolding long-term opportunity in international dairy markets. We believe it is vital that the co-operative has a central role to play in this – to build a strong farmer-owned business that can compete on a global scale against the other giant dairy co-operatives like Fonterra, Dairy Farmers of America, Friesland Campina and Arla – not to mention multi-national giants like Nestle and Kraft.  MG is the only partner for WCB that has the scale and co-op structure to invest, grow and maximise farmgate returns for farmers, and ultimately regional communities.  We remain committed to acquiring WCB, satisfying our conditions and delivering the benefits of the combination back to the farmgate.  This can only be good for local investment, jobs and communities.

4.    Can MG guarantee that its WCB bid will not damage the farm gate milk price? If so, how?

MG would NOT proceed with any bid unless the result added to the overall milk price and our analysis shows that a combination of WCB and MG will do just that. MG itself is entering an exciting phase of growth and has identified a series of strategic capital investments that will target a $1.00 per kilogram of milk solids lift underlying farmgate milk prices over a five year period from FY12 to F17.  MG will deliver these benefits to supplier shareholders including those WCB suppliers who join the co-operative regardless of the outcome of the WCB bids.

5.    Competition is often said to be healthy for businesses. Doesn’t a strong competitor for milk supply help to keep MG on its toes?

I would counter that it is MG that keeps competitors on their toes, as we traditionally lead the market on farmgate pricing.  As a 100% farmer controlled co-operative MG’s primary objective will always be to maximise farmgate returns for our supplier/shareholders. As opposed to competitors who have the primary objective of maximising profits to their shareholders.

MG is the only partner for WCB that has the scale and co-op structure to invest, grow and maximise farmgate returns for farmers, and ultimately regional communities.

The current structure has not served the industry well over the last decade. The Australian industry has gone backwards while Asian demand has grown significantly – Australia is now a less relevant player in the international markets than it was in 2002. This has coincided with the drought, deregulation of the dairy industry and investment by foreign players.

Increased participation by foreign players has not lead to a restructure of the processing industry – the processing structure remains extremely fragmented. While foreign players have been in Australia for some time, they have not driven growth for Australian dairy products in the international markets.

MG’s own strategic plans and the proposal for WCB will assist in leading the Australian dairy industry to recovery and growth over the longer term. Our proposal is the one that creates a larger-scale globally competitive Australian dairy company uniquely positioned to capture growth in international dairy markets. Our plans involve investing and growing the businesses to meet the opportunities.

6.    Why do you think farmers tend to be polarised in their attitudes towards MG?

I can’t comment on why. However, what I can say is that in recent years MG has been committed to improving and building relationships with dairy farmers and this has been underpinned by meaningful, in depth engagement and transparency. We believe this is yielding some very positive long term results for both the farmers and their co-operative.

We respect that people will have differing opinions however we welcome the opportunity to talk with any farmers to clarify questions, share our plans and our vision for the industry, as we did this week in Warrnambool and Mt Gambier.

We will continue to work hard to demonstrate to WCB and other dairy farmers the benefits and importance of becoming a supplier/shareholder of the co-operative. We believe we have a compelling story and look forward to talking to WCB dairy farmers about our offer and the opportunity for them to become part of the co-op.

7.    How has MG’s culture changed in the last few years?

Over the past few years MG has been on a journey to become a more efficient and effective co-operative that can return more, and contribute more to its supplier shareholders, their communities and the industry as a whole. There is no doubt this has been reflected in the culture of our business, while remaining true to the co-ops core objective of maximising total farmgate returns.  In addition, to a focus on improving and building relationships with dairy farmers, corporate governance has also been a priority, including developing Board and Committee Charters and formalising policies such as Public Disclosure, Risk Management and a Code of Conduct.  Over the past couple of years MG has also had Board renewal with a number of new supplier Directors being appointed, appointing two specialist Directors; as well as the appointment of a new executive management team, including Managing Director, Gary Helou.

8.    How differently do you expect to run the Allansford factory? Can its workers feel secure?

Foremost our bid is about investing and growing the MG/WCB business to increase scale and maximise farmgate returns. We see significant potential and this can only be good for local investment, jobs and communities. Both the MG and WCB processing facilities are already operating at or near capacity and they are making different products which makes them complementary. Down the track, we may identify operating efficiencies and if we do, these will flow through to the farmgate price and ultimately to farmers and their communities. That said we believe there will be substantial opportunities for existing employees in an enlarged group with national and global reach.

Our proposal is the one that creates a larger-scale globally competitive Australian dairy company uniquely positioned to capture growth in international dairy markets. Our plans involve investing and growing the businesses to meet the opportunities.

9.    Aside from size, how would MGW compare to Fonterra?

Fonterra has become a highly successful global dairy giant and we believe that MG now has a similar opportunity before it. The combined business will be positioned to capture the unfolding long-term opportunity in international dairy markets. A combined MG/WCB would create one of the largest Australian owned food and beverage businesses, 100% controlled by dairy farmers, making us a top 20 global dairy producer.  To put it another way when combined we’ll have forecast revenues (FY14) of $3.2b and be one of Australia’s top 5 food and beverage businesses, behind Lion and Coca-Cola Amatil, Fonterra and JBS Australia.

The combination will give us the necessary scale, market reach and efficiencies, and like Fonterra, we will have far greater relevance in export markets to be able to grow the brands and products from each business.

The combined business will have over 3000 suppliers, approximately 4 billion litres of milk processed annually, a diverse product range and market reach, forecast revenue of $3.2 billion (2014), diverse operations and a strong production base in Australia’s best producing dairy regions.

So this is an historic opportunity for Murray Goulburn and WCB suppliers and shareholders to create a larger scale, globally competitive Australian dairy food company that they own and control.  Importantly, it will retain the primary objectives of a co-operative in maximising farmgate returns for farmer owners.  It will also support on-farm and industry investment, and in turn grow the Australian dairy industry for the benefit of regional communities.