High dairy debt lev­els no

North East & Goulburn Murray Farmer - - NEWS -

NORTH East and Goul­burn dairy farm­ers have wel­comed state and fed­eral gov­ern­ment as­sis­tance pack­ages in the wake of the re­cent cuts to the far­m­gate milk price made by two of Aus­tralia’s largest dairy pro­ces­sors, Mur­ray Goul­burn (MG) and Fon­terra.

But farm groups be­lieve that al­low­ing farm­ers to take on more debt is no an­swer to the in­dus­try’s prob­lems.

On the back of the Vic­to­rian Gov­ern­ment’s $11.4 mil­lion sup­port pack­age, the Fed­eral Gov­ern­ment an­nounced it too would sup­port the in­dus­try with a $555m pack­age.

Aus­tralian Dairy Farm­ers (ADF) wel­comed the as­sis­tance.

ADF chief ex­ec­u­tive of­fi­cer Ben Sta­p­ley said the pack­age met many of the ur­gent needs of dairy farm­ers.

“We ap­pre­ci­ate recog­ni­tion that this shock is a com­bi­na­tion of fac­tors lead­ing to what we call a mar­ket su­per down cy­cle, and that the fun­da­men­tals of our in­dus­try and the en­tire sec­tor are strong,” he said.

Dairy farm­ers were not ask­ing for a bail-out as the in­dus­try had backed it­self and be­lieved the long-term res­o­lu­tion rested with it.

But gov­ern­ments could help to bridge the res­o­lu­tion.

“Ex­cep­tional cir­cum­stance re­cov­ery grants would be a use­ful ad­di­tion and we will con­tinue to press for these,” Mr Sta­p­ley said. THE KEY EL­E­MENTS OF THE DAIRY

SUP­PORT PACK­AGE IN­CLUDE: $555 mil­lion in Dairy Re­cov­ery Con­ces­sional Loans. $2 mil­lion to es­tab­lish a com­mod­ity milk price in­dex. $900,000 for an ad­di­tional nine Ru­ral Fi­nan­cial Coun­sel­lors in Vic­to­ria, Tas­ma­nia, South Aus­tralia and New South Wales. $900,000 for Dairy Aus­tralia’s ‘Tac­tics for Tight Times’ pro­gram. Fast track­ing Farm House­hold Al­lowance ap­pli­ca­tions with 18 more Depart­ment of Hu­man Ser­vices em­ploy­ees pro­cess­ing claims. Ap­point­ment of a Depart­ment of Hu­man Ser­vices dairy in­dus­try li­ai­son of­fi­cer. Re­di­rect­ion of two Depart­ment of Hu­man Ser­vices mo­bile ser­vice cen­tres to dairy re­gions.

“In the dry con­di­tions af­fect­ing much of Aus­tralia’s dairy pro­duc­tion zone, we will con­tinue to press for the re­lease of Com­mon­wealth-owned en­vi­ron­men­tal wa­ter, and to ad­vo­cate for stronger com­pe­ti­tion pol­icy with the Aus­tralian Com­pe­ti­tion and Con­sumer Com­mis­sion (ACCC) to smooth out volatil­ity and safe­guard the fu­ture of our in­dus­try.

“Dairy farm­ers are not ask­ing for a re­turn to past days of a highly reg­u­lated mar­ket, and they are not ask­ing for con­sumers to be pun­ished with a tax as pro­posed by some on the fringe of our in­dus­try.

“With the right sup­port and col­lab­o­ra­tion in our in­dus­try, with con­sumers and with gov­ern­ments, we can work through this and build a stronger fu­ture for the en­tire dairy sec­tor,” he said.

Na­tion­als’Vic­to­rian leader Peter Walsh said that while dairy farm­ers would ap­pre­ci­ate the ex­tra sup­port for their in­dus­try, the next step must in­clude mea­sures that bring im­me­di­ate re­lief to hip pock­ets and “the cash flow crunch that’s hurt­ing farm books”.

“We strongly en­cour­age the Andrews Gov­ern­ment to now work on di­rect re­lief mea­sures, like rates re­bates and waiver of charges like fixed wa­ter costs, which farm­ers have been rais­ing with us,” Mr Walsh said.

“Dairy pro­ces­sors must also step up. Mur­ray Goul­burn and Fon­terra have been miss­ing in ac­tion.

“The pro­ces­sors still have a lot to an­swer for and they must also do their bit to make sure our dairy farm­ers get through the cri­sis.”

Aus­tralian pro­ces­sor Na­tional Dairy Prod­ucts threw its hat into the ring of­fer­ing its own opin­ion on how to fix the in­dus­try’s prob­lems.

It re­leased a state­ment that a milk levy should be re­in­stated im­me­di­ately.

It said the levy should be col- lected on ev­ery litre of milk sold un­til the Fed­eral Gov­ern­ment puts in place a na­tional agri­cul­tural pol­icy and a na­tional wa­ter pol­icy.

“Both sides of gov­ern­ment have been lack­ing any in­tro­duc­tion of na­tional poli­cies on two of our most im­por­tant re­sources,” NDP said.

“We should not wait for a time of cri­sis to ask our gov­ern­ment to act.

“The leg­is­la­tion is there. We’ve had a milk levy be­fore.

“It will not af­fect any free trade agree­ments.

“It’s a sim­ple re-en­act­ment of ex­ist­ing leg­is­la­tion.”

The com­pany said that all of Aus­tralia was af­fected by the dairy cri­sis and that only MG and Fon­terra sup­pli­ers ben­e­fit from the gov­ern­ment’s “band aid ap­proach”.

NDP said the in­dus­try needed a na­tional ap­proach to a na­tional cri­sis.

“Let’s ex­pand this pro­gram to in­cor­po­rate all of Aus­tralian dairy farm­ers, not just a se­lect few,” it said.

“We don’t want a United Statesled so­lu­tion where some $US20 bil­lion in agri­cul­tural aid is pro­vided an­nu­ally.

“(We need) a na­tional, self­fund­ing scheme that sup­ports the farmer.

“The coun­try doesn’t need more debt.”

Dur­ing his visit to North East Vic­to­ria last month, Deputy Prime Min­is­ter and Fed­eral Agri­cul­ture and Wa­ter Re­sources Min­is­ter Barn­aby Joyce told North East and Goul­burn Mur­ray Farmer that the

Fed­eral Gov­ern­ment was pro­vid­ing con­ces­sional loans and en­sur­ing farm­ers had ac­cess to ru­ral fi­nan­cial coun­sel­lors.

“We have been in con­tact with both the re­tail­ers and with the dairy pro­duc­ers and with the NFF (Na­tional Farm­ers’ Fed­er­a­tion) on this is­sue,” Min­is­ter Joyce said.

“We have al­ready made sure that the farm house­hold al­lowance, which for a mum and dad on the farm will get them about $1000 a fort­night, is in place.

“We have made the reg­u­la­tory changes so they get ac­cess as this keeps the wolves from the door and the gro­ceries paid for.

“The mat­ter has been re­ferred to the ACCC so that if there has been any malef­i­cence in this it is prop­erly in­ves­ti­gated through that pur­pose and as part of the agri­cul­tural white pa­per.”

Mr Joyce said he would be meet­ing with dairy farm­ers across the state while he was on the elec­tion cam­paign trail to hear from them di­rectly as a stronger ex­am­i­na­tion of the wider in­dus­try was needed.

“In my dis­cus­sions with the dairy in­dus­try it is quite clear that one of the mit­i­gat­ing fac­tors in this has been the growth in dairy ex­ports into east Asia, so in very re­cent times there has been a cool­ing in that tra­jec­tory which is some­thing we have to man­age like ev­ery­thing else, but the real prob­lems in this is re­ally sourced around Europe and es­pe­cially Rus­sia and the is­sue per­tain­ing to that,” he said.

“My strong be­lief is that the long- term tra­jec­tory of dairy con­sump­tion glob­ally is up and these things will come into play, they will pass through and we will be back with a strong foot­ing. “Dairy does have a strong fu­ture. “We have a prob­lem at the mo­ment and in all agri­cul­tural sec­tors you have things that are go­ing very well, record price in cat­tle, record price in meat sheep, record price in chick­peas, turn around in the bulk wine sales and then you have other prob­lems you have to man­age.”

Fourth gen­er­a­tion dairy farmer Nathan Shan­non who runs 1000 acres at Nar­ing and milks 650 cows daily has been sup­ply­ing milk to Mur­ray Goul­burn for 15 years.

He said he was “frus­trated and dis­ap­pointed” with the cur­rent price cri­sis. Mr Shan­non said that ev­ery farmer would have known that the milk price was never go­ing to be able to hold at what MG was pay­ing based on the world price “un­less they weren’t pay­ing at­ten­tion”.

He was dis­ap­pointed with the MG board – most of whom were dairy farm­ers them­selves.

He said the di­rec­tors did not tell any­one of the full risks they were tak­ing to build the com­pany’s busi­ness.

“I fully bought into the whole value-add that (MG for­mer chief ex­ec­u­tive) Gary Helou talked about and want­ing to im­prove the ef­fi­cien­cies in the fac­tory and to make bet­ter prod­ucts for the world mar­ket,” Mr Shan­non said.

“MG is in­ter­na­tion­ally known and other coun­tries want to buy off a big com­pany like MG, so (Helou) wanted to take a risk with a par­tic­u­lar prod­uct and if it had of paid off it would have been great be­cause we may have re­ceived 60 to 80 cents more per kilo.

“If you want to grow your busi­ness then you can’t keep do­ing the same thing over and over and ex­pect a dif­fer­ent re­sult, so I was happy for MG to change things up and take a bit of a risk to get bet­ter re­turns for all of us in the long run.

“But we weren’t told of the full risk of what re­ally needed to hap­pen to grow the busi­ness ex­po­nen­tially .

“It re­ally isn’t good enough to claim ig­no­rance when you signed the bit of pa­per to un­der­take the job. “That is just neg­li­gent.” Mr Shan­non also said that the di­rec­tors clearly had not asked the ques­tions they should have been putting, or check­ing on what Mr Helou was telling them.

“No CEO leaves like that and is out of the build­ing the same day, so some­thing is not quite right,” the farmer said.

“The board is say­ing that they were ask­ing ques­tions but they were not given the full pic­ture by Mr Helou.

“But who do you trust? Who do you be­lieve?”

Mr Shan­non said that de­spite the price cut there isn’t much he would have done dif­fer­ently in terms of in­vest­ment on his farm even if he knew that he wouldn’t be re­ceiv­ing the full $6 per kilo­gram of milk solids he was promised by MG.

“I re­ally wouldn’t have done much dif­fer­ent on the farm,” he said.

“I still would have ir­ri­gated, still would have used the same wa­ter, sown the same pas­ture and I ac­tu­ally didn’t need to buy car­ry­over wa­ter.

“I sold off 35 cows the day af­ter they an­nounced the price cut as that is re­ally the only change to what I am do­ing that I can control.

“I wanted to keep my young stock and the cows I did sell would have been sold in spring any­way, so I just sold them three or four months ear­lier.

“Of course this has an im­pact, but I could see it was go­ing to hap­pen and so you run your busi­ness know­ing that and try and limit your ex­po­sure as much as you can be­cause be­ing a fourth gen­er­a­tion farmer I am in­her­ently con­ser­va­tive any­way, so we min­imise our ex­po­sure to big risks.”

The real is­sue that dairy farm­ers faced, ac­cord­ing to Mr Shan­non, is the fluc­tu­at­ing price of tem­po­rary wa­ter and wa­ter trad­ing rules.

“If I have no wa­ter and have to buy it, I can’t af­ford it,” he said.

DAIRY DILEMMA: The real is­sue dairy farm­ers’ face is the high price of tem­po­rary wa­ter and the trad­ing rules.

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