Putting ourselves in the best position

In the lead up to the Australian Dairy Conference later this month, I’ve invited a few fellow speakers to do guest posts on Milk Maid Marian. One of them, Steve Spencer of the Freshlogic consultancy, issued this challenge to dairy farmers.

Steve Spencer

Steve Spencer

The world has changed in the last 5 years and with that so have the prospects for dairy producers. If you read the views of the global food gurus, we’re riding on the cusp of an ever-tightening world food shortage that puts the dairy industry in a great position. We’ll have plenty of competitors going after that future prize, and in the last decade dominated by the effects of drought, other exporters have emerged. But at the same time, decades of protectionism by major economies is steady evaporating, as governments admit they can’t afford to fund the high walls built around agriculture.

As we’ve seen in the past couple of years, the variables affecting our farmgate milk prices in Australia have become more complex, and the volatility in the future world that affects those prices, grain costs and weather will only increase.

As we step into the future, it has never been more important to make sure our industry is structured in the best possible way to make sure we optimise the flows from the market back onto farms. It isn’t something that we should steadily work on for a few years – this pressure now urgent!

I will be presenting a paper at the Australian Dairy Conference at Warragul, Vic (which is being held on 22-23 February) that will aim to stir up the debate on the agenda for getting that going. It will look at precisely what can be done to improve returns, and it should be no surprise to anyone to recognise that most of the things that can be done are within our own control.

So my paper will tour:
• How farmers do or can engage with the dairy market
• The value of the co-operative as a channel to that market
• How they perform in different industries
• What changes others are making and why
• What changes are most important in the Australian market
• How those can happen

We’ll discuss the elephant in the room. Murray Goulburn is the largest farmer-owned processor of milk in southern Australia, accountable to their shareholder-suppliers for performance through farmgate milk prices and dividends. In a highly competitive farmgate environment, prices paid by foreign-owned, privately owned or listed competitors will be set at or above MG’s price – others will only pay what they have to in order to get a secure milk flow. They are accountable to shareholders who may not be dairy farmers purely on their performance as a business.

It will be up to the co-op’s farmer shareholders to determine if the company is properly structured and managed to maximise performance, and the opportunities and risks of change.
Whether dairy farmers supply and own shares in MG or not and no matter where they farm, the performance of that largest co-op is an issue relevant to all Australian dairy farmers, as milk values are set by MG’s payment performance.

Like Australia’s competitors in the US and Europe will find as they embrace deregulation in the years to come, clinging to tradition is probably the worst thing farmers can do for the future of the industry.

I urge dairy farmers, their advisers and investors to attend the conference and get involved.