Following the money – where farmer levies go

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Every farmer knows that each time we sell a litre of milk or send a cow to market, we pay some sort of compulsory levy or fee. But where does that money go and what does it do for us?

Well, the UDV has created a very lovely infographic to follow the money as it trickles down to a plethora of bodies. The biggie is Dairy Australia but there are plenty of others less familiar to the average milk maid.

The infographic is so chock-a-block full of useful information that it simply doesn’t fit on the page but I have lopped the right hand side off so you can get the gist of it. To see the whole thing, click on the link below.

dairyfarmer-representation-and-dairy-farm-statutory-payments-2016

The front follows the money and the second page explains our convoluted system of representation.

Bon appétit! For the next course, Milk Maid Marian will serve a short but sweet distillation of how DA spends our precious funds.

We’re all in this together

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“We’re all in this together” was the message on the invitation. How true.

So, on Saturday night, around 200 locals enjoyed a “Night on the Green” sponsored by the UDV. As the kids romped on jumping castles or chased each other with balloon swords, the grown-ups took the chance to unwind and regroup after a torrid 18 months. And it didn’t matter where you send your milk.

Among the farmers at the Night on the Green were Paul and Lisa Mumford, who just days earlier had opened their farm, their books and their hearts to visitors. The pair are well-respected and volunteering to make their business a Focus Farm brings a level of scrutiny most would find daunting: everything is on show, right down to their most revealing financials.

The husband and wife team were in equal parts honest, humble and inspiring as they answered questions about their aspirations and challenges. We’ll all learn a lot from Paul and Lisa because they’re so generous with their knowledge.

And, on Sunday, a group of about 10 local Landcarer friends spent a morning doing something for one of our own. Kaye is my Landcare heroine. For years now, she has been the backbone of our group, giving away thousands of trees and coordinating our mob of volunteers to great effect. A long bout of illness meant Kaye’s magnificent garden needed a tidy up. What an opportunity to show her we cared!

This is what community is all about. We’re all in this together! Merry Christmas!

Straight-talking UDV president Adam Jenkins on milk price cuts

In the confusion that’s followed the cuts to milk prices, I asked the president of the United Dairyfarmers of Victoria, Adam Jenkins, how the UDV was responding.

Adam had some very clear messages for milk processors, politicians and bankers. A big thank-you to Catherine Jenkins for filming Adam’s answers to my questions in their calf shed on a very windy day.

This video is the first in a short series addressing the milk price crisis.

 

 

Divided we fall: so where to from here?

After a nose dive

Don’t worry if you fall, just get back up again.

Wayne said the other day that the farm has taught him something about resilience: live in the moment when the sun is shining and, when the hail stings your skin, think of the big picture.

But the big picture right now is confusing for this Milk Maid. The WCB war has thrust the outlook for Australian dairy into the headlines and, with it, a lot of questions.

Our co-op has offered half a billion dollars for WCB, claiming that its loss to a global player would be “a tragedy”. In its statement to the ASX, MG Co-op said:

“The combination of MG and WCB is the only option available that delivers an Australian-owned and operated company with the scale, capacity, strength and momentum to service global growth opportunities, returning profits to dairy farmers and their communities.”

In the midst of all this, the UDV hosted a farmer forum on Monday where independent dairy analyst, Dr Jon Hauser, told farmers that supporting cooperatives is a “no brainer” but has also said the golden era of dairy in Asia was “largely rhetoric” and that real progress for Australian dairy would come through cost control and increased efficiencies at the farm and the factory.

He created a stir at the forum too, simply by saying that milk prices of 48 to 50 cents per litre could not be sustained. Not popular news.

So, now that Saputo is on the cusp of announcing a new offer, prompting WCB to ask for a suspension of trade, what if Helou’s tragedy does unfold? How will the General regroup?

MG will certainly have to work harder to woo those who harbour a co-operative spirit but supply other processors. And that, I’m afraid, is something the co-op has not done well to date, in my view. Perhaps the tide is beginning to turn, reading between the lines of Helou’s interview with The Weekly Times dairy writer, Simone Smith, headlined Divided we fall:

“There is nothing stopping our farmers rallying around a well-run farmer run company that is of scale and relevance.”

“There is no law in the land against that. That’s what we are advocating. This rally around the MG foundation to create a new farmer-owned business that is really relevant to the 21st century.

“The farmers will only benefit from direct ownership and direct influence in supply chain from the farm all the way to market.”

I guess we farmers are used to falling and getting back up again.

 

UPDATE: In response to a question asked below, Dr Hauser has kindly sent me this. I don’t know how to put it – complete with charts – in the comments section, so here it is instead:

Sorry Marian, It would take me a day to properly represent my position on the Asian growth story and even more to update my analysis to the most recent trade data.

Here is a snapshot of the important data:

JH1

This is the demand growth for the developing nations. This comes from the FAO

Most of this growth has been serviced by internal development of their dairy industries.

JH2

This the export growth from the key dairy traders – Europe, US, NZ, Argentina, Australia. The average is 2 – 3 billion litres / year. Even if this has been accelerating in the past few years it is unlikely that the opportunity is more than 4 – 5 billion litres / year. I believe the average growth opportunity for the global traders is 3 – 4 billion litres but I would need to review the more recent data to check this.

YOY Production milk production growth – Million Litres
JH3

This is the year on year growth that has come from the major traders. This chart shows 15 billion litres of growth from the EU, US, NZ and Argentina from July 2010 – June 2012. The total for the period from July 2009 – June 2012 is 12 billion. In other words we saw contraction in 2009 and 2012 and that is because the milk price was low. The US and Europe turn growth on or off according to commodity and milk price (New Zealand just keeps on trucking except when it doesn’t rain).

In summary:

  • The Asia growth story is not rhetoric but the suggestion that the hole can’t or won’t be filled is.
  • The US and Europe will turn on and off milk production according to demand and price. They had no difficulty growing supply at 5 billion litres / year in 2010 / 2011 and they are already gearing up to do it again in 2014.
  • No I don’t subscribe to the analysis that has been done for the Horizon 2020 report. I believe the “Supply Gap” analysis is a flawed way of assessing Australia’s future export opportunity.

 

I asked UDV president whether dairy farmers should tip their milk down the drain

I’ve been asked a few times why dairy farmers don’t just refuse to supply supermarkets or tip our milk down the drain in protest at the unsustainable price of milk. Meanwhile, the actions of the Brits in blockading milk processors has been spectacularly successful. I thought I’d put a few “burning” milk price questions to the president of the United Dairy Farmers of Victoria, Kerry Callow, who kindly offered the following replies.

Kerry Callow

UDV president, Kerry Callow

MMM: We’ve all heard that $1 milk is a big deal for farmers but what about consumers? It sounds like a great deal, especially for families doing it tough!
KC: Milk at $1 is obviously attractive to consumers. Especially those with limited incomes and young families to feed. Dairy farming families understand limited incomes. They have had a cut in prices they receive – like having a salary cut. But this is not just about the here and now. It’s also about what’s sustainable. What will consumers have in years to come? Milk at $1 a litre retail is not sustainable for dairy farmers to produce. In Queensland it is reported that already 30 farms have left the dairy industry and more will follow. And consumers will have noticed the challenge in finding non-supermarket brand full cream milk in the dairy sections. This is a strategy for the supermarkets to dominate the supply of milk products industry. It is hard to see how consumers will keep the choices they currently enjoy. Farmers cannot afford to produce milk at the current price.

MMM: Why don’t farmers simply refuse to sell the milk at such low prices?
KC: Dairy farmers also have families to feed, children to educate and bills to pay (power has gone up 16% since the end of June, refrigerant gases required to cool milk have skyrocketed). And dairy farmers also have contracts to supply milk to processors to fulfil. The financial penalty to not supply is greater than the financial penalty to supply at a loss.

MMM: What about tipping the milk down the drain for a few days?
KC: Tipping milk out for a few days doesn’t fix the problem. (Disposing of milk that way does create added management challenges on farm). The problem is that supermarkets have decided to use milk as a ’loss leader’ and hold the price of milk down to ridiculous levels.

MMM: Is the VFF/UDV considering action like the farmers took in the UK? Would it work here?
KC: There is also discussion in New South Wales and Queensland about taking direct action. Because dairy farmers in those states rely heavily on the fresh milk market they are more exposed to the supermarkets pricing actions. Taking direct action is difficult because in this case the focus of dairy farmers angst is not a government or agency or authority, it is a commercial entity that has shown limited capacity to hear farmers concerns or acknowledge that their actions are directly and adversely impacting dairy farming families. That said, farmers are getting frustrated with the current situation.

MMM: Is there a silver lining to the $1 milk campaign?
KC: Not really. The supermarkets will point to milk consumption being higher now than before the retail milk price was slashed. But we think the consumer is heading down the road of less choice for milk products. And now we have other products like cheese and butter being marketed heavily on price. That is not a positive outcome.