ADF elections provide clear mandate for change
At Australian Dairy Farmers (ADF) AGM, existing board members Heath Cook, Ben Bennett and David Beca were all re-elected to the ADF board. This is a good result for NSW and Queensland dairy farmers that eastAUSmilk represents. Also, it would have been a mockery if there were no Victorian dairy farmer on the ADF board given that over 60% of Australia’s milk comes from Victoria.
It is a win for all dairy farmers in Australia who want change in the industry. For too long, the industry has been held back by people and organisations who want to keep the industry the same. It is now well beyond time for ADF to lead the industry forward and the excuses must stop.
There are a few issues in the industry that must be fixed by ADF in the next few years. These will only be fixed by strategic, clear and forceful leadership by ADF. Being nice has failed ADF for many years and has led to ADF being largely ignored by other stakeholders within and outside the industry.
Massive change is required in our RD&E sector. We must see the significant RD&E resources available used effectively on priority issues to drive profitability for farmers. We need to see a focus on regional solutions and programs which drive profitability not a centralised model which is doomed to fail farmers. The current DA plan is even greater centralisation, and this is a disaster. Also, we cannot allow processors to continue to be equal partners with ADF to oversee RD&E unless they contribute equal funding.
Another priority for ADF is ensuring integrity in price setting. It was disgraceful to see prices in southern Australia plummet in July this year to levels well below what economics could justify. Prices around $8/kg were not justifiable and showed the power of processors and ADPF to dictate prices. This compares to an announcement by Fonterra last week for a price of $NZ9.50-10.50 which is over $A1/kg more than what Australian farmers are receiving. This plummeting of milk price has made a complete mockery of the dairy code and highlights the massive problems in competition policy.
Eric Danzi, CEO eastAUSmilk
ADF approves eastAUSmilk members in NSW
It was very positive to see the ADF board approve eastAUSmilk members in NSW as members of ADF. This is an issue that has been ongoing for almost 3 years, and it is great to see that it has now been resolved.
As eastAUSmilk has significantly increased our membership in NSW in the past few years, more and more farmers in NSW have wanted to be involved in ADF and applied for membership. This is positive since it is important for a significant number of farmers to have a say in in ADF which is the national voice for dairy farmers in Australia.
I would like to thank the directors of ADF for their resolution of this issue. Particularly NSW dairy farmer Heath Cook who has championed this issue for many years and ADF president Ben Bennett.
I know that many NSW dairy farmers who have been approved as ADF members are very happy and grateful that this has occurred. I expect that this will create further interest from dairy farmers in NSW to become members of eastAUSmilk and ADF.
eastAUSmilk looks forward to ADF moving with the times and showing leadership on some critical issues of importance to dairy farmers across Australia. The industry is currently in a very difficult position and the reduction in milk prices in many states this year has made things even more difficult.
In this state of flux, strong leadership from ADF is a must to force change. There is no value in working to maintain the status quo when the current situation is so difficult for so many farmers. I’m sure this is the expectation from the new ADF members from NSW that ADF has just approved as well as most other dairy farmers in Australia.
Eric Danzi, CEO eastAUSmilk
Milk prices and dairy code
Now we are into January, everyone in the dairy industry will start to focus on what will happen to milk prices in July. The dairy code requires processors to publish preliminary prices and contracts by 1 June and some will make announcements well before then. And speculation will increase in the coming months as both farmers and processors try to feel out what will happen.
There has been a lot of complaining by some processors and processor representatives about the dairy code and milk prices. Some media commentators, claiming to present a professional view, have simply repeated the views of some processors and their representatives.
They claim the Dairy Industry Code is distorting the market and forcing farmgate prices too high. That’s simply not true.
The Dairy Industry Code has corrected some of the market failures in the dairy industry and gone some way to ensuring farmgate prices reflect competition for milk. That is about supply and demand for milk across Australia and within each different region. When the supply of milk reduces, as it has so significantly in recent years because of significant cost increases, the price would logically go up. Processors willing and able to pay more will attract milk. Those not willing to pay more lose milk to their competitors and will face a shrinking business. It’s all pretty simple, really. Some in the industry don’t seem to understand these economic basics, although most farmers do.
What would happen if some processors, and the media who parrots their views, got their way and milk prices fell by $2/kg or around 15c/L?
Disaster! There would be absolute carnage and milk production would probably halve across Australia in a few years. Is that the outcome that some processors want, or do they think farmers are magicians and can continue to produce milk while losing money?
Like it or not, the Australian dairy industry has contracted massively over recent decades, as a result of income being stripped from farmers. It is now an industry largely focussed on domestic demand and increasingly on domestic fresh milk. It is time for all to recognise this and stop living in the past.
Eric Danzi, CEO eastAUSmilk
Joe Bradley the new eastAUSmilk President, Tim Bale and Waylon Barron Vice Presidents
Joe Bradley was recently appointed to replace Matt Trace on the eastAUSmilk board. He also took over Matts position as president of eastUSmilk. Tim Bale and Waylon Barron were both elected vice presidents.
Matt has left the eastAUSmilk board due to potential conflicts it would create in his new role on the Australian Dairy Farmers (ADF) board. This is unfortunate but understandable. Matt has done an outstanding job as president of eastAUSmilk, and it has been impressive to watch Matt grow and develop his statesmanlike approach in the role of president and chair.
Matt will be lost to the board of eastAUSmilk but will be very useful to eastAUSmilk and our dairy farmer members in his new role at ADF. Anyone who knows Matt is well aware that he is a determined person who loves a fight and will be forthright and strategic in achieving outcomes for dairy farmers.
EastAUSmilk is very lucky to be able to replace Matt with Joe as president. Both are extremely capable and determined leaders who are passionate about dairy farming. I’m sure that Joe will do a fine job as president of eastAUSmilk. Joe is from Dayboro just north of Brisbane and is a person I have looked up to since joining the dairy industry and have regularly sought his advice and assistance. This is another occasion where Joe’s leadership was needed, and he is willing and able to step up.
Tim Bale is from Stewarts River near Port Macquarie in NSW. Tim has recently joined the eastAUSmilk board but has immense experience in many roles both within and outside the dairy industry. He is well known for central to the establishment of the farmers owned brand with Woolworths. Tim’s experience and knowledge will be invaluable to eastAUSmilk as vice president.
It’s also great to see Waylon Barron step up as vice president. Waylon is from the darling downs region in Queensland and is one of many dairy farmers who have become involved in eastAUSmilk over the past 6 years. He started on the darling downs district council, came onto the board just over 2 years ago and now has stepped up as vice president. Waylon is a very switched on and respected dairy farmer who I’m sure will adapt quickly to the role of vice president.
Congratulations to Joe, Tim and Waylon.
Eric Danzi, CEO eastAUSmilk.
Coles lifts milk prices, but Woolworths and Aldi haven’t yet
About 3 weeks ago, Coles quietly lifted the price of Coles milk on its shelves by 10c/L to $4.80 for 3L, $3.30 for 2L and $1.70 for 1L. This caught many in the industry by surprise and is seen a real positive move by Coles. It shows that the dark days of $1/L are a distant memory and it is time for everyone in the industry, including me, to move on from this.
It shows that Coles is adjusting the price on shelf as required to meet the cost of getting milk into their stores. The market is working like all other products which is all the industry ever wanted.
It also highlights that Coles is a market leader in paying farmers a fair price for the milk. Many of my members in southern NSW have made it clear to me that Coles has had a very positive impact on their business in the past 4 years. And the next 3 years are positive given the contracts they have with Coles in a time of considerable uncertainty with milk prices especially in southern Australia.
At this stage, Woolworths and Aldi have not lifted their milk price to match Coles. A logical question is why? Perhaps they are playing games to try and get some brownie points with consumers at the expense of the dairy industry but will lift prices in the coming weeks?
Or perhaps Woolworths and Aldi do not have the same cost pressures since they pay farmers less for their milk? I think in many areas of Australia, especially where Coles has direct supply with dairy farmers, this is very likely to be the case.
Whatever the reason, Woolworths and Aldi are very unlikely to be making more than a very small margin on milk. Matching the Coles price increases would be a welcome move by the industry and would allow price increases to farmers and processors for milk at a time when costs are increasing substantially. It would also allow processors to increase their brands wholesale prices to allow further small price increases to processors and farmers.
So Woolworths and Aldi, please help the dairy industry by matching the Coles price increase.
Eric Danzi, CEO eastAUSmilk.
Processors want the Dairy code of practice watered down
The code of practice has been in place for 3 years now and has had a significant impact on improving competition in the industry. It has created a fairer and more balanced bargaining between processors and farmers and this is exactly what the code was introduced for.
Farmer advocacy groups including eastAUSmilk and Australian Dairy farmers where key advocates for introducing the code whereas processing representatives tried to block the introduction of the code. A special thanks to Craig Hough from Australian Dairy Farmers who was key to drafting the code. Craig finished his time at Australian Dairy Farmers last week and his knowledge, drive for change and enthusiasm will be sorely missed.
Some processors are now complaining that the code does not give them enough flexibility when competition between processors drives the price to farmers up. These processors and their representatives want the code watered down so processors can reduce prices to farmers like the bad old days pre the code. This will allow processing companies worth billions of dollars to once again dictate to the small family farms that supply them. Their attitude is not surprising since processors were opposed to the code and have never wanted farmers to have any more bargaining power.
Some processors have competed well in the market to attract additional milk supply. The code has allowed this to happen much more readily than it was previously. Are these processors, who want to compete for and attract milk, also complaining that the code needs to be watered down? I would think not.
I would note that processors have identified the boundaries of the code and found out what they can and can’t do. In several areas, this means the intent of the code is not translated into practice. This appears a more significant issue to me than complaints by processors that small family businesses now have too much power over multi-billion dollar companies.
Eric Danzi, CEO eastAUSmilk.
Milk Price Increasing Painfully Slow
All processors have now released their starting milk prices for 2023/24 and both Bega and Lactalis have increased their price very slightly since. It is disappointing that prices have remained low and no processor appears keen to lift the price significantly to make it attractive for farmers to sign a contract. It is unclear why this is, but it appears that keeping the farmgate price low is more important to processors than picking up milk. It appears Norco has already signed a significant number of new suppliers while it doesn’t appear that Bega or Lactalis have signed many to date.
It is very difficult to tell what the average price is likely to be for each processor since all processors have an incentive to make their price look as good as possible rather than report accurate numbers. However, it is likely that Bega, Lactalis and Norco are all between 88 and 90c/L.
What is very clear is there are significant variations for individual farmers between processors due to different payment systems. This variation could be up to 6c/L on some farms which is an astonishing variation. As a result, it is extremely important for all farmers to get estimates of all processors before making decisions about their future.
All processors have moved to multi-year contracts now which will stifle milk price increases in the future. However, this makes it even more important for processors to compete for milk now and secure all the milk they can since they will not be able to attract milk for at least 2 years in the northern market.
It will be interesting to see if any processors make a decisive move re price to attract farmers signatures. Many farmers are waiting for this to occur and are unlikely to sign any contract until this happens.
Eric Danzi, CEO eastAUSmilk
eastAUSmilk board meets to plan future
Last week the eastAUSmilk board met to discuss critical issues facing dairy farmers and plan for the future. This is the second time the new board, which commenced on 1 January 2023, has met. The fresh faces on the board, with only 1 board member being on the board for longer than 18 months, is a real positive for eastAUSmilk. Also, the drive and passion to lead the dairy industry forward is clear within the board.
Some guests attended the board meeting including Terry McCosker from RCS who spoke about the potential for carbon farming in the dairy industry. Unfortunately, carbon farming does not make commercial sense for dairy farmers at this stage due to lack of scale, but this may change in the future. Rob Cooper discussed the NSW Dairy Action Plan, and it is positive to see the NSW government attempting to help the dairy industry move forward with a clear plan.
New eastAUSmilk government relations manager Mike Smith provided training for the board on the basics of lobbying given his many decades working in senior roles in government and lobbying government. Mike also discussed his government relations plan for eastAUSmilk which will set the foundation for the coming year.
The board also continued a strategic planning process where clear priorities were developed for eastAUSmilk for the next 3 years. Some of the highest priorities decided included the need to implement a proactive program around bobby calves. The downturn in the beef market this year has highlighted the importance of this. Another key priority is to assist farmers implement new technology on their farms to drive innovation, profitability, and growth for the industry.
The upcoming yearly contracting period between processors and farmers was front of mind for board members at the meeting also. A very interesting next few months awaits.
Eric Danzi, CEO eastAUSmilk