‘11 cents a retail litre’ levy – a chance for dairy salvation?

Economic ‘market failure’ in Australia’s dairy industry meant the time was well and truly overdue for the federal government to consider introducing an 11 cent a litre farm support levy on the price of retail milk.

Advocacy group Dairy Connect CEO Shaughn Morgan said today that dairy farmers nationally were beset by drought, low farm gate and high fodder prices, sky-rocketing energy costs, continuing unfair milk supply agreements and shifting consumer demand to plant based drinks, with lacking ‘truth in labelling’ action.

“Farmer families are exiting dairying because, in current terms, the sector is not delivering a viable economic framework for their farming enterprises,” he said.

Dairy farmers were also at risk of being locked into low milk price agreements for up to five years because of delays in introducing a federal Mandatory Dairy Code of Conduct for producers and processors, as recommended by the ACCC.

The new Mandatory Code is scheduled for introduction in mid-2020 but it should be implemented sooner.

Shaughn endorsed comments by national consumer advocate Allan Fels who said a helping hand was needed again for dairy farmers, 20 years on from deregulation of the sector.

The former Australian Competition and Consumer Commission chairman Professor Fels (who oversaw the introduction of deregulation) said dairy farmers needed to receive a reasonable return for their product to ensure the sustainability of the industry as well as continued supply of Australian milk to customers.

He said the reintroduction of a retail levy of 11c per litre of liquid milk, which had been originally introduced at the time of deregulation and expired after eight years, could be the answer.

“To my mind, the levy was an adequate solution for that period following the deregulation of the dairy sector and it expired at a time when the industry had adjusted to the new way of operating,” he told the Weekly Times.

“Obviously, times change and sometimes this form of assistance can be re-examined, particularly in light of the difficulties faced by farmers.”

Former Assistant Minister for Children and Families and current Federal Nationals Member for Lyne, David Gillespie, also called for a temporary retail levy of 10% across all milk lines in February this year.

“Deregulation intended to make the sector more efficient and for a time, it did, but not everything goes to the textbook and outside factors, such as drought and the changing retail environment, mean efficient dairy farmers are struggling,” Professor Fels said.”

Dairy Australia has indicated that Australian milk production, for the 2019/2020 season, continues to decline with production down 8.4% since the same time last year. It is anticipated a further drop, during the 2019/2020 season, in national milk production of 3 - 5% to 8.3 to 8.5 billion litres due to a reduced national herd size and high input costs. Australia was producing 11 billion litres at the time of deregulation.

“With dairy farmers continuing to exit the dairy industry and the number of dairy farms reducing, we need action now”, Shaughn concluded.