What’s Moo-ving Milk Prices?
Australia’s milk production is slowly shrinking, with some regions shrinking faster than others, because milk processors are making it happen.
A significant reason for this shrinkage is the pricing and demand environment does not give farmers sufficient incentive or confidence to expand or improve, and, in some cases, this commercial environment encourages dairying properties to leave the industry.
Against all rationality and against the industry’s long-term interests, early in 2024 we began to see media stories from Australian Dairy Products Federation, the advocacy megaphone for dairy processors, saying milk prices are too high and they have to come down.
So many reasons, all fake, were advanced for this.
“We’ll see more imports displacing expensive Australian dairy products,” they said … though dairy imports fell last year - down 9.1 per cent for last financial year to May, exactly the period over which ADPF says milk prices would encourage more coming in.
“We want to increase the volume of Australian dairy products and keep imports out,” they said … though cutting prices will always reduce production and send dairy farms out of the industry.
Those who care about the long term and the facts know Australia’s dairy imports bounce around. Yes, they were up in 2022-3 … to about the same level as 2017-8. As has been reported in the media, the ADPF's own Milk Value portal shows cheese imports have been falling since November last year. The facts haven’t stopped processors claiming that high dairy imports are a big factor requiring that they make a big drop in farmgate prices for the 2024-25 season.
Milk processors have chosen to export into low cost markets, and now try to claim domestic farmgate prices must be kept low so exports are competitive in those markets – there’s no bottom point to such an argument, no lower and lower price at which they can’t claim that if the price was just a little lower they could sell into yet another market.
When the ADPF makes these demands for cuts at the farm gate, without any authority whatsoever from their members, they’re demanding a shrinking milk pool, less Australian milk in homes, and an unfair market. For any regulators who care to listen and watch, they’re demonstrating the market is still uncompetitive, and unfair, with farmers at the mercy of ADPF demands.
Mike Smith, eastAUSmilk Government Relations Manager
Dairy Plan for Queensland Moves Closer
The advisory group which is guiding development of Queensland’s dairy plan has last week begun the task of looking at all of the feedback received so far and identifying priorities and common themes – issues which must be addressed in the plan, and ideas for change.
This dairy plan is all about growing Queensland’s milk pool, building the economic viability of the industry, facilitating productivity and efficiency improvements, and building confidence in the future of the industry in Queensland.
With eastAUSmilk leading development of the plan, feedback has been received from six district meetings (about 120 people attended all together), discussions amongst advisory group members themselves, and individual discussions with SubTropical Dairy, larger processors, and others. In addition, eastAUSmilk has received emails from several individuals about the problems they see as priorities, and suggesting solutions, and received responses to our invitation for online submissions. Notes of district meetings and other discussions, together with online and email input, have amounted to many thousands of words and over a hundred pages of notes.
The advisory group is made up of representatives from each of eastAUSmilk, SubTropical Dairy, Department of Agriculture and Fisheries, Lactalis, Bega, Norco and DFMC.
Once that group has digested all the feedback and proposals received so far, the next steps will include seeking advisory group consensus on the issues which must be addressed and proposals for change, then trying to reduce them to a smaller number of concrete proposals which will have a real and lasting impact.
The group will then have to weave them into a draft plan.
Once draft documents are ready to put in front of farmers, processors and other stakeholders, we’ll schedule another round of face-to-face consultations including district meetings.
Once that further feedback has been received, the advisory group is expected to modify their draft, and propose a final plan.
There’s more information about the plan on the eastAUSmilk website.
Mike Smith, eastAUSmilk Government Relations Manager
EastAUSmilk and Government: 2024
EastAUSmilk’s engagement with governments will be just as active in 2024 as it was in 2023.
We need to make sure the Commonwealth and the states fulsomely implement the recommendations of the Food Security Inquiry and commit to a dairy industry package that builds sustainable incomes and milk production.
Early in the year we’ll be making a submission to the Senate’s inquiry into the misuse or market power by major supermarkets, and making clear that many of the problems in the dairy industry are based around supermarkets undermining industry viability.
Queensland will have an election on October 26, and we’ll want all parties to commit to policies and programs which build dairy industry viability. We’ll hope to see a taste of that in the 2024 Queensland State budget, too, and an acknowledgement of the issue from New South Wales and the Commonwealth.
During 2024, we expect the Commonwealth to start the process of reviewing the Dairy Industry Code, and we will be advocating major and urgent improvements.
New South Wales has a Dairy Industry Plan, and we will continue discussing the need for such a plan across Queensland’s dairying industries, with the Queensland Government, as we also discuss the Northern Dairy Industry Plan with both New South Wales and Queensland governments.
EastAUSmilk has already made a submission about the Queensland State budget 2024, and we will be doing the same for the Commonwealth and New South Wales.
We might have had a reprieve from drought, but we need to press those three governments about the deficiencies in their respective drought programs.
Bobby calf/dairy beef solutions remain a priority in our engagement with all three governments, and we’re awaiting feedback on recent proposals.
We’re hoping current negotiations with the Queensland government, to facilitate on-farm tech training and uptake bear fruit early in 2024.
… and early in 2024 eastAUSmilk will engage with the Commonwealth to ensure they adopt the recommendations of the Commonwealth Parliament’s Food Security report, and implement them properly – particularly the rescue package for the dairy industry.
Mike Smith, eastAUSmilk government relations manager.
Saputo acquisition by Coles
As reported previously, eastAUSmilk and other players in the dairy industry, have made multiple submissions to the Australian Competition and Consumer Commission urging that they attach conditions to the acquisition by Coles of two Saputo milk processing facilities, in Laverton (Victoria) and Erskine Park (New South Wales).
Our concern was twofold – one, that an integrated supply chain would give Coles unprecedented powers, and two, that the acquisition could, over time, substantially reduce competition for fresh milk, to the detriment of farmers. eastAUSmilk made it clear the industry needs more milk processor competition, not less.
As well as with ACCC, eastAUSmilk has repeatedly raised these issues with Commonwealth, New South Wales and Queensland governments.
ACCC initially released a Statement of Issues in July 2023 identifying preliminary concerns about Coles’ bargaining position in the dairy supply chain, and the potential for reduced competition for raw milk.
The ACCC has now rejected the proposition that the acquisition would reduce competition, and that they need to intervene. No conditions have been placed on the acquisition. The scope for ACCC to intervene was always narrow, restricted to the marginal impact on competition of the acquisition, and issues such as the community having ongoing access to locally sourced fresh milk, regional community resilience, fairness between big business and small, and so on, cannot be considered by ACCC.
On Wednesday 6 December, eastAUSmilk CEO Eric Danzi, and Government Relations Manager Mike Smith, discussed the Commission’s conclusions with ACCC Deputy Chair Mick Keogh.
ACCC concluded the acquisition is unlikely to result in a substantial lessening of competition over the next 5 years, and noted Coles’ conduct with dairy farmer suppliers is covered by the mandatory Dairy Code of Conduct and their interactions with processors is covered by the voluntary Food and Grocery Code of Conduct. They use the 5-year timeframe because they cannot predict industry conditions further ahead than that, with sufficient confidence.
They will release a statement of their reasons, probably early in the new year. eastAUSmilk will consider if there are further options open to us, to protect dairy farmers from negative outcomes of the acquisition. We hope other processors can use these developments to increase competition for milk supply, in the Sydney region.
Mike Smith, eastAUSmilk Government Relations Manager
Are Dairy Farmers Still Droughted?
eastAUSmilk has been chasing public servants in the Commonwealth, New South Wales and Queensland governments, and their Ministerial offices, to stress drought issues and drought response inadequacies.
This week, there’s good drought news for dairy farmers in most parts of Queensland and New South Wales. Tim Bale, near Taree, says the rain is ideal and “it’s a late spring”; Paul Newland in Malanda says everything has turned green overnight; Waylon Barron, just south of Toowoomba, reports widespread rain has stimulated furious summer planting; Kay Tommerup, near Beaudesert says her pigs will need to learn to swim.
With recent good rains, city dwellers may be mistaken and think all is now great for farmers everywhere, but they would be wrong.
Our members are cautioning that while recent widespread rains are a welcome relief, not everyone has had enough rain to make a difference. Most are also saying that without decent follow-up rains in the next couple of months, any pasture or feed growth promoted by November rains will be too limited to make a great difference.
In many cases, watercourses have flowed only a little, and dams have not filled, which means irrigation water access may not be much improved.
Every bit of advice from the experts says farmers must plan for drought and build their resilience. Our members have been investing time and money in their drought planning, and have incurred costs, along with the stress of a very dry 2023. While few had begun actively destocking before the rain, many had been letting herd size shrink, opting to keep numbers low, and trying to source feed to see them through the summer. Most have been unable to grow fodder to see them through to winter rains, and will still have to buy feed to supplement whatever they can now grow following November’s rains.
Feedback from members is making it very clear that circumstances are very different from region to region, and between localities, which makes it important that government policymakers are stopped from trying to make policy on the basis of the overall or average industry situation.
eastAUSmilk is going to keep on talking with government at every level about the ongoing need to ensure policies and programs reflect a full understanding of the true and diverse circumstances of farmers, and the possibility that recent rains could turn out to be not a real reprieve, but false hope.
Mike Smith, eastAUSmilk Government Relations Manager
Biosecurity Levy – Coming to a Dairy Farm Near You?
The Federal Labor Government’s 2023 budget included what they are calling a Biosecurity Protection Levy, to contribute to the cost of biosecurity measures. The government’s proposition is that, because farmers are the beneficiary of biosecurity measures, they should contribute. It will be set at 10% of the 2020-2021 agricultural levy rates.
The government has called for submissions by 6 October 2023 about how the levy is to be introduced, but stressed they are not open to submissions rejecting it, and not open to major modifications.
eastAUSmilk is in the process of developing their views about how they respond to this narrow ‘invitation’. Other agricultural industry bodies are also considering their response, and it is clear some will reject the whole idea and will oppose the new impost.
This is not a levy. It is a fee, charge, excise, or tax and should be accurately labelled as such. This point is not merely semantic. The existing levy system collects funds for industry purposes, is overseen by industry representative bodies, and is generally supported by the agriculture sector. The Biosecurity Protection Levy will, on the other hand, be funnelled into consolidated revenue, will not necessarily be spent on biosecurity initiatives of relevance to industry, and there will be no industry oversight.
The Government’s own levy guidelines set out how a levy is introduced and managed, and this new budget measure is introduced in a way not countenanced by those guidelines.
eastAUSmilk is consulting with Australian Dairy Farmers, and with Queensland Farmers Federation and their affiliated organisations, in developing a response.
Mike Smith, eastAUSmilk Government Relations Officer
Saputo decision delayed
The Australian Competition and Consumer Commission has announced a delay in presenting their findings, on the proposed acquisition of two Saputo milk processing plants by Coles.
They were due to present their final findings on the proposed acquisition on Thursday 14 September, but have delayed their report indefinitely, pending receipt of further information from the parties, i.e. Coles and Saputo.
EastAUSmilk Chief Executive Officer Eric Danzi said that eastAUSmilk had several times during the ACCC review made submissions raising possible consequences of a completely unregulated acquisition. eastAUSmilk had urged the ACCC to ensure, if the acquisition proceeded, that conditions were attached to it which protected dairy farmers and other milk processors from the effects of reduced competition which would arise.
In July this year, ACCC published a Statement of Issues outlining their competition concerns and asked of further submissions.
The two milk processing plants in question are at Laverton North in Victoria and Erskine Park in New South Wales, and the ACCC expressed serious concerns at reduced competition in the central coast area of New South Wales and impacts on other processors. In eastAUSmilk’s view, this impact could be felt from central NSW up into southern Queensland.
While many NSW members of eastAUSmilk have a good working relationship with Coles, some dairy farmers are concerned that if Coles owns the NSW facility it could impact where northern NSW and southern Queensland milk is processed, and hence the viability of production.
The ACCC review is only part of the story, though. Their review is conducted on very narrow grounds – the incremental change to competition in the market, caused by the proposed acquisition.
They are not allowed to:
consider social aspirations shared by all Australians – ongoing access to locally sourced fresh milk, a vibrant dairy industry, regional community resilience, fairness between big business and small, and so on,
address the total effect on competition that the acquiring company will have, nor
treat this as a precedent for agricultural supply chain vertical integration.
The ACCC say they will announce a revised decision date in due course.
Mike Smith, eastAUSmilk Government Relations Officer
eastAUSmilk AGM
EastAUSmilk’s Annual General Meeting was held in Pittsworth, Queensland on Wednesday 30 August, following last year’s in Lismore, New South Wales. Members from both New South Wales and Queensland attended, as well as staff.
In his report, President Matt Trace highlighted the impact of floods on members, as well as milk pricing issues, and the need to build eastAUSmilk’s profile amongst non-members. Chief Executive Officer Eric Danzi attended via Zoom because he was at an important Dairy NSW Member Event in Merimbula New South Wales. His report stressed the strategic plan developed by the Board, and member services. Auditor Alan Teese, from Gillow and Teese, discussed the financial report with members, and all reports were subsequently accepted.
An ”other business” agenda item allowed members to raise further issues from the floor of the meeting.
Members at the AGM were then welcomed to Peter Garratt’s nearby Southbrook dairy farm, where Peter spoke in detail about his feed and nutrition practices, which enable significantly higher carrying capacity, and hence profitability, than pasture feeding alone.
In conjunction with the Annual General Meeting, eastAUSmilk’s Board also met in person, and considered issues as wide-ranging as the Northern Dairy Plan, artificial insemination, dairy beef exports, and Bermuda grass. They also received an update on government relations matters, particularly including Government funding of dairy programs, and the proposed purchase of two Saputo milk processing facilities by Coles. The Board also considered briefly greater use of technology, to allow on-line attendance at future Annual General Meetings by members who couldn’t be there in person.
Both the Board and the Annual General Meeting spent time discussing the very positive membership growth in New South Wales following the amalgamation of Dairy Connect and QDO, and regional visits by the CEO.
Mike Smith, eastAUSmilk Government Relations Manager
Coles and Saputo Sage Continues
Submissions to the Australian Competition and Consumer Commission, on their concerns about the proposed acquisition of Saputo milk processing plants by Coles, closed on 3 August. The ACCC currently propose to make their final findings by 14 September.
In their statement of issues published in July, ACCC raised several areas of concern. They believe it is possible that sale of the Erskine Park (NSW) facility could see significantly less competition in the market for fresh milk, in several regions of NSW, and they are also concerned at the impact on the dairy industry if Coles decides to move processing from further north, or elsewhere, to the Erskine Park facility.
eastAUSmilk has made a submission in response to the concerns raised by the ACCC, and stressed they are not trying to force Saputo to hang onto milk processing plants they don’t want, nor that Coles will harm the dairy industry recklessly. Rather, the eastAUSmilk submission stressed that the competitive advantage which would be enjoyed by Coles if they bought the plants, and the production opportunities they represent, would most likely see Coles make changes to their operations which could drastically impact markets as far north as southern Queensland.
The solutions proposed by eastAUSmilk focused on keeping competition in the NSW market for fresh milk, by encouraging Saputo to go to market with their plants, to see if other milk processors are interested, or alternatively encouraging a joint venture between Coles and another processor or attach conditions to the sale which protect competition. In all cases, eastAUSmilk urged that the Dairy Industry Code be updated to address both this proposed purchase, and any other proposals for vertical integration in the industry.
eastAUSmilk has offered to work with ACCC to develop each of these proposals, because any solution will work better if it has dairy farmer input.
Mike Smith, eastAUSmilk Government Relations Manager
Australian Competition and Consumer Commission has concerns about Coles
Following submissions from eastAUSmilk and other industry participants, the Australian Competition and Consumer Commission on 20 July published a statement setting out the issues they are concerned about, with Coles’ proposal to buy two milk processing plants from Saputo.
The ACCC noted the proposed acquisition may lead to Saputo exiting markets for the acquisition of raw milk in NSW, thereby substantially lessening competition for the acquisition of raw milk in those markets.
They also noted the proposed acquisition may substantially lessen competition by giving Coles the incentive and ability to harm or frustrate competitor businesses at various points of the dairy supply chain.
The ACCC noted a significant number of industry participants had raised strong concerns about the proposed acquisition, particularly given it will result in a major structural change as the first time a supermarket has its own milk processing facilities.
Their full statement can be downloaded from the ACCC Government website. Issues of concern to the ACCC are discussed in more detail in the ACCC's full statement.
While many NSW members of eastAUSmilk have a good working relationship with Coles, some Queensland dairy farmers are concerned that if Coles owns the NSW facility it could impact where Queensland milk is processed, and hence the viability of some Queensland production.
The ACCC Review is only part of the story, though. Their review is conducted on very narrow grounds – the incremental change to competition in the market, caused by the proposed acquisition. They are not allowed to:
consider social aspirations shared by all Australians – ongoing access to locally sourced fresh milk, a vibrant dairy industry, regional community resilience, fairness between big business and small, and more,
address the total effect on competition that the acquiring company will have, nor
treat this as a precedent for agricultural supply chain vertical integration.
EastAUSmilk is likely to make further submissions to ACCC about the issues they have raised.
Mike Smith, eastAUSmilk Government Relations Manager
EastAUSmilk meets More Decision-Makers
Last week, eastAUSmilk’s team met with officers of the Federal Treasury Department, and advisors to New South Wales Minister for Agriculture, and Regional and Western New South Wales, Tara Moriarty.
eastAUSmilk Chair of the Board Matt Trace and Government Relations Manager Mike Smith talked with Treasury about the Australian Competition and Consumer Commission review of the proposed purchase by Coles of two Saputo milk processing plants. They also pressed the case for review and updating of the Dairy Industry Code. The Treasury officers were very interested in the proposition that some of the processors have begun to work out ways around the provisions of the Code, and agreed to meet eastAUSmilk again, once the ACCC announces the results of their review, on 20 July.
The discussion with Minister Moriarty’s advisors covered the same Coles and Saputo issues, and changes needed to the Dairy Industry Code, as well as industry sustainability measures, animal welfare issues, and foot and mouth disease preparedness. eastAUSmilk and the Minister’s office will get back together soon for further discussions, and some of the topics covered will also be discussed with New South Wales’s Department of Primary Industries, in the near future.
Minister Moriarty was invited to visit a dairy farm, and eastAUSmilk promised to show her the basics of how a dairy farm works. She was also invited to an eastAUSmilk Board meeting.
As with all of the meetings held with Ministerial Offices and Departments over the past several weeks, eastAUSmilk has found discussions to be positive, and constructive, and in all cases there’s a commitment to continue them.
Mike Smith, Government Relations Manager eastAUSmilk
EastAUSmilk meet with Ministerial Officers in Canberra
Queensland dairy farmer and eastAUSmilk Board Chair Matt Trace, and Government Relations Manager Mike Smith, were in Canberra last week, discussing important issues with public servants and Ministerial Offices. Amongst others, they met with Department of Agriculture, Fisheries and Forestry, and advisors to the Assistant Minister for Competition Andrew Leigh and Treasurer Jim Chalmers.
Competition policy, and the proposed purchase by Coles of Saputo milk processing plants in Victoria and NSW, were discussed with everyone, and the need for an urgent review of the Dairy Industry Code was stressed. eastAUSmilk made it clear the industry needs more milk processor competition, not less. Other issues raised included industry sustainability opportunities and needs, structural reform of industry bodies, extending Queensland’s previous “fair go” marketing campaign, animal welfare, and foot and mouth disease.
The eastAUSmilk team were at pains to stress that while some dairy farmers can look forward, plan, and invest, many are still struggling under debt and stress arising from dollar-a-litre milk, drought, floods, and other pressures beyond their control. This impacts the capacity of the industry to withstand unreasonable or uncompetitive behaviour by processors or big retailers, such as milk prices not matching increases in farm input costs.
They also stressed competition laws are fundamentally flawed when no consideration is given by Australian Competition and Consumer Commission or Government to issues such as ongoing access to locally sourced fresh milk, regional community resilience, fairness between big business and small, and more.
More meetings will be held in the next week, to ensure politicians and public servants at every level understand current conditions in the industry, and the importance of these issues to dairy farmers.
ACCC expects to announce the results of their review of the proposed Coles/Saputo deal on 20 July. Their options include waving it through, rejecting it, or raising competition issues to be addressed. A further round of discussions is planned once that review is finished.
Mike Smith, Government Relations Manager eastAUSmilk
Visit to the ACCC
EastAUSmilk Chief Executive Officer Eric Danzi and Government Relations Manager Mike Smith met with Australian Competition and Consumer Commission in Sydney last week, to discuss the proposed purchase by Coles of Saputo processing plants in Laverton North (Victoria) and Erskine Park (New South Wales). The ACCC is investigating the impact on competition of the proposed acquisition.
Unfortunately, the ACCC’s investigation is very narrow, and pays zero attention to the aspirations shared by all Australians – ongoing access to locally sourced fresh milk, regional community resilience, fairness, and the like. They are also unable to take account of the appalling record of the major retailers in treating dairy farmers like serfs.
EastAUSmilk has made a strong submission opposing the acquisition, and the discussion with ACCC focussed on the content of what the submission said.
Politicians in Queensland, New South Wales and Federally will be actively pressed by eastAUSmilk to ensure the acquisition is blocked.
Errol Gerber and Joe Bradley, both eastAUSmilk District Councillors, plus Government Relations Manager Mike Smith, showed Queensland’s Minister for Agricultural Industry Development and Fisheries Mark Furner around Errol’s Clarendon dairy farm last week.
As well as showing the Minister over farm operations, the eastAUSmilk bent the Minister’s ear about a very wide range of topics, amongst which Joe was able to talk about his experience with Queensland Government dairy industry programs, particularly taking up smart collars for monitoring individual and herd well-being.
Discussion ranged over Tick Virus vaccine supplies (the Minister told us his department promises they will be available from next week), farmgate pricing concerns, industry resilience & drought/disaster preparation, improvements to various Government programs, and Coles’ proposed purchase of Saputo processing plants. During discussions the Minister mentioned his grandfather was a dairy farmer, and he had spent time on the property back in hand-milking days.
Mike Smith, Government Relations Manager eastAUSmilk
Commonwealth Government figures get their feet dirty.
eastAUSmilk was pleased to help Commonwealth Government figures get their feet dirty as they checked out a working dairy farm last week.
Glamorgan Vale dairy farm Tim Beattie hosted Treasurer Hon Dr Jim Chalmers MP, Minister for Agriculture, Fisheries and Forestry, Senator the Hon Murray Watt, and local Member of Parliament Hon Shayne Neumann, and showed them over his dairying operation.
The three Labor Members of Parliament were given a thorough briefing from Tim on how the enterprise operates, and the issues impacting dairy farmers.
eastAUSmilk President Matt Trace, Board member Kay Tommerup, and member Errol Gerber were also on hand to help ensure the visitors took away the best possible understanding of industry issues.
The eastAUSmilk team pressed the Labor MPs on many issues of great importance to dairy farmers: the behaviour of major retailers, inadequacies of current competition regulation and the Dairy Industry Code, business resilience and planning, on-farm technology uptake, animal welfare, and more.
The four dairy farmers spoke firsthand of the fears of dairy farmers across three states at this proposal for Coles to purchase milk processing plants from Saputo in New South Wales and Victoria. Such an unprecedented level of control over the supply chain would allow Coles to severely impact the business of competitors, and once more drive farmgate milk prices down to poverty levels, as they and Woolworths did with dollar-a-litre milk. The Australian Competition and Consumer Commission is currently reviewing the proposed purchase but can review only narrow competition issues.
eastAUSmilk wants the Commonwealth Government to address this proposed purchase by looking more broadly at fairness, the need for a sustainable and profitable dairy industry, regional community resilience, and the community’s ongoing demand for locally sourced fresh milk.
While the MPs listened intently and asked good questions, dairy farmers will be looking for concrete action.
Mike Smith, eastAUSmilk Government Relations Manager