Senate: get the ACCC to fix it

I can see why the Senate delayed its report into the dairy industry: it has no meaningful solutions. But it does seem pretty sure that the two main responses to the crisis – a voluntary code of practice and milk price index – aren’t the answers either.

The report makes 12 recommendations and four of them are simply to ask the ACCC to act on the most pressing issues.

Two recommendations suggest reviewing the code of conduct, with a view to making it mandatory.

There are other pretty darn obvious ones like suggesting a consumer campaign and asking processors to set prudent opening prices to avoid step downs.

The standout is Recommendation 11:
“The committee considers that the proposed Dairy Commodity Price Index is of limited value and its development should not be continued.”

The government is in the process of assessing tenders for a $2 million project to produce the index. That’s a lot of taxpayer money and I would hate to see it wasted, or worse, used to wallpaper over the cracks in the system.

The Senate inquiry has identified the issues we face. That’s a good start. Let’s hope the committee’s faith in the ACCC being able to solve them is well placed.

 

Helou tells the Senate he’s a hero

While he might not have used the word “hero” exactly, former Murray Goulburn managing director Gary Helou was in complete denial when he fronted the Senate inquiry today.

Helou told senators he had the right plan, a plan that had delivered for two-and-a-half years. “The strategy was working and we were getting the right results,” he railed. Only one “unforeseeable” thing had derailed MG’s plans. That thing?

Not the global dairy commodity prices that had been falling steadily for month after month or the inattention of the board to the reportedly growing alarm of senior management. It was a Chinese regulatory change regarding cross-border trade via e-commerce. I gather this is code for selling milk powder and UHT milk on the equivalent of eBay into China.

As Gary explained it, he and the board were aware of the falling global commodity prices but selling these dairy foods – which he described as “our biggest sellers” – had been mitigating those losses.

The Chinese seemed to be tightening up on that, err, “cross-border e-commerce” and MG made two ASX announcements in response to media reports, the first on April 12, followed by this update on April 18.

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Both announcements concluded that the regulation did “not have a material impact on MG’s business”. Totally in contradiction to everything Gary Helou said today.

Just four days later, MG entered a trading halt. When it emerged from that trading halt on April 27, here’s what the announcement said about those big sellers:

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MG was still saying the Chinese announcement had no material impact on MG’s business. So, where does the truth lie?

With MG facing at least one class action, the Senate inquiry and under investigation by both the ACCC and ASIC, farmers have been hopeful of finding answers to the debacle that cost some their livelihoods.

But asked twice by senators whether he had been questioned by authorities investigating if MG had misled investors, Gary Helou said “no”. Both times he paused for several seconds before answering that one very simple question and, incredibly, each time it was an unequivocal “no”.

This is one witness to the Senate Inquiry who raised more questions than were answered.

United Dairy Farmers of Victoria president, Adam Jenkins summed up the sense of disbelief that followed perfectly. If it was possible, the ACCC farmer consultation forums that roll into town over the next couple of weeks just got that bit more important to attend.

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