Moment with Morgan - July 2019

Market failure grinds dairy farmers into the dust of history

Across Australia’s dairy valleys this month, producers are taking stock of their businesses as the economic phenomenon of ‘market failure’ continues to grind the financial life out of their farming enterprises.

The crisis is attributable to the worsening impacts of drought; dairy herds being culled; skyrocketing energy prices; higher production costs; and unconscionable milk supply agreements.

These impacts were further evidenced late in June with the release of Dairy Australia’s Situation and Outlook report which canvassed confidence levels in February among 800 dairy farmers against the backdrop of domestic and export dairy market challenges and opportunities.

The DA report revealed that only 34 per cent of dairy producers felt positive about the industry and that this was the lowest recorded level since the survey had started 15 years ago.

Milk production was set to drop again, down to 8.1-8.3 billion litres – levels not seen for the past 25 years.

Victorian dairy farmer Jason Smith told ABC Rural last week he had never seen the industry under such pressure.

A fifth-generation producer Mr Smith said he was used to the early starts and late nights, the freezing fingers, sick animals and constant threat of being covered in cow dung.

In 1980 there were 22,000 dairy farms in Australia and today there are fewer than 6,000, he said.

Australia's share in the global dairy market had fallen from 16 per cent in the 1990s to just 6 per cent last year.

Industry analysts could be forgiven for leaping to the conclusion that the Federal Government was ‘out to lunch’, oblivious to the state of an industry that requires urgent legislative attention.

In the aftermath of the re-election of the Liberal National Party Government in May, Dairy Connect remains firmly in favour of appointing a Federal Dairy Commissioner to represent the industry nationally.

A Federal Dairy Commissioner with the powers of a royal commissioner could fast-track solutions to the myriad market challenges facing dairy production in Australia. The role would be backed by a small independent support office.

The proposed new Mandatory Code of Conduct for the dairy industry is not due to kick-in until 1 July next year. It should be introduced NOW and not next year so that the safeguards that the Mandatory Code provides can be used by dairy farmers. Milk supply agreements must be fair and transparent and the Code provides an avenue to ensure a form of oversight by the ACCC and protection for dairy farmers.

Industry issues that need urgent attention could be addressed this year by a Federal Commissioner with appropriate powers to make decisions immediately and independently of government.

Importantly, the NSW Government has established a dairy business unit with the Department of Primary Industries and will be announcing the appointment of a Fresh Milk and Dairy Advocate, who must be free of Government constraints and can be able to make public comment as required, to provide further support to dairy farmers throughout NSW.

The issues confronting the dairy industry at the current time are many and we need to ensure long term sustainability not continued reduction in the number of dairy farming enterprises.   

Whether the dairy plan will provide that guidance only time will tell but we can no longer afford any further reviews. The issues are known, we need the solutions now.

Ashley Rootsey