High dairy debt levels no
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.