Tuesday, 14 February 2017 13:25

Dairy takes centre stage

Written by  Madeleine Brennan
The ACCC inquiry, launched by the Federal Government, and a Senate inquiry, led by Jacqui Lambie, are running simultaneously and industry submissions to both are similar The ACCC inquiry, launched by the Federal Government, and a Senate inquiry, led by Jacqui Lambie, are running simultaneously and industry submissions to both are similar

A BETTER deal for farmers in contracts, abolition of  retrospective “clawback” payments and the impacts of $1L milk were just some of the many topics canvassed in submissions to the two whole-of-sector dairy inquiries currently underway.

The Senate Standing Committee on Economics Inquiry – initiated by independent Tasmanian Senator Jacqui Lambie – has finished its public consultation and is set to report on February 24.

Meanwhile, the ACCC began its national tour of public hearing last week, starting in Queensland.

A third inquiry into the actions of Murray Goulburn and Fonterra during last year’s farmgate milk price cuts is also be undertaken and, according to ACCC chairman Rod Sims, is at its “advanced stages”.

Groups across the dairy supply chain are keen to make sure their voice is heard, including industry bodies, processors and individuals who either made a submission or are attending hearings.

On the contracts front, increased access to fixed pricing, for the southern markets most exposed to global volatility, was flagged by Dairy Farmers Milk Cooperative (DFMC) as a way to reduce farmer risk.

In its submission to the ACCC the co-op, owned by 345 dairy farmers across Australia, said farmers should be able to fix the price for up to 50% of their milk for three years, or all of their milk for one year.

“Fairness across the dairy value chain, together with more transparent and competitive milk pricing and contracting, are needed to make dairy farming profitable,” chairman Duncan McInnes said.

A submission by Lion Dairy & Drinks showed fixed price options had already enjoyed strong take-up since being offered in 2013, with about 92% of eligible farmers in the southern milk region electing to have this option to at least part of their volumes in 2015/16.

“Fixed pricing gives a greater measure of certainty to farmers who are wholly exposed to market pricing, as is the case in the Southern Region,” the Lion submission said.

The issue of $1/litre milk was also a feature of submissions, with various views on its impacts on the market.

Dairy’s peak farmer lobby group, Australian Dairy Farmers, maintained that $1L milk had taken millions of dollars out of the value chain, and, contrary to promises made by retailers at the time, had failed to increase milk consumption.

 “It is time for Coles to raise the price of $1/litre milk to a sustainable level,” it urged.

Meanwhile, processors were keen to highlight the challenges they faced in sourcing and managing perishable product across large distances, the current price squeeze at both the local and global levels, as well as their efforts to maintain good relations with suppliers and keep them informed of market conditions.

They attempted to address any concerns about contract transparency by pointing to the terms of the standard milk supply agreements readily available on their website and to suppliers.

“MG does not consider these terms to be ambiguous,” the Murray Goulburn submission said.

In regards to the current milk pricing system, Bega Cheese again took a swipe at the actions of Murray Goulburn for cutting the price late in the 2015/16 season.

“While it may seem a simplistic response, Bega Cheese believes the actions were wrong and did not reflect the traditional way price has been managed or the trust relationship that is so important between suppliers and processors.”

It said the current pricing system works well for both dairy farmers and milk processors “so long as the pricing methodology involving opening prices and pricing updates is diligently managed and clearly communicated to dairy farmers”.

Several submissions, including ADF, highlighted the need for an industry rather than government-led solution to current issues.

“Farmers need processors and processors need big business – so the solutions require all of us to come together to ensure a positive future,” interim chief executive John McQueen said.

Despite the optimistic mood for change, ADF stated that, while it continued to fight for farmers, not all issues were within its control.

“Even though we won’t be able to solve all of the issues farmers are facing, we are working to relieve some of the pressures to create change to ensure that an unfair share of the risk in the value chain is not taken by the farmer and the recent events in the industry don’t happen again,” the submission said.

With more than 100 farmers attending the first ACCC hearing in Toowoomba last week, Queensland Dairyfarmers vice-president Ross McInnes said farmers welcomed the opportunity to contribute.

“It was a good, constructive meeting,” Mr McInnes said.

“Farmers have an expectation that some tangible recommendations will come out of it. And then it’s up to government to accept it and pass it.”

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