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

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

Get quotes from all processors and be decisive!

All processors have now released their starting milk prices for 2023/24 and it is time for all dairy farmers to properly explore their options. All farmers who are off contract should speak to all processors who may want their milk and get estimates from everyone before making decisions about their future.

As reported last week, Lactalis has announced a 5c/L reduction in price to around 82c/L on average. Norco, DFMC and Bega have all lifted payments to farmers by around 1c/L and all are estimated to average around 88c/L. However, there is no such thing as an average farmer so there will be great variation as to which processor would pay an individual farmer the highest price which is why you must get actual estimates from everyone.

If farmers can pool together to form a considerable volume of milk, this will assist greatly in discussions with processors. The larger the volume of milk the greater the incentive for processors to pay a higher price and therefore the higher the price that farmers can achieve. At least 10ML is required to gain significant bargaining power for farmers. But having 20ML will significantly increase what a processor would pay since it would solve their milk shortage problems with 1 transaction.

I strongly encourage dairy farmers to be proactive and sign a contract that is commercially attractive. There is a 14-day cooling off period so if another processor offers a higher price and the processor you signed with won’t match, you can rescind the contract and sign with someone else.

Farmers need to act commercially and as a result encourage processors to do the same.

Eric Danzi, CEO eastAUSmilk

Farmers disgusted as Lactalis announces a 5c/L drop in milk price

Dairy farmers in Queensland and northern NSW were caught off guard when Lactalis announced a 5c/L drop in milk price. The surprise soon turned to anger and many Lactalis suppliers have reached out to me expressing their disgust. Given the massive shortage of milk in Australia, especially in Queensland and NSW, this announcement makes no sense at all.

It appears to be a poorly thought-out strategy designed to suppress milk price. It is now likely that the strategy will backfire on Lactalis. It is incredibly unlikely that Bega, DFMC and Norco will follow suit and as such Lactalis is likely to lose a lot of milk to other processors from their bold strategy.

Everyone in the industry recognises that there is a massive shortage of milk and the loss of around 0.5 billion litres of milk in Australia in the past year demonstrates this clearly. Also, it is well understood that the cost of getting fresh milk into Queensland from Victoria is at least 10c/L more expensive than procuring milk from local farms in Queensland and northern NSW. So regardless of what is happening to milk price in Victoria, milk prices in the northern industry must go up this year.

What should Lactalis do? If they don’t want to lose at least 50ML of milk in Queensland and northern NSW, and perhaps closer to 100ML, they should immediately correct their mistake and remove the minus sign from their announcement. Anything less than a 5c/L increase will not quell the storm created by their announcement on Friday.

So, what should Lactalis suppliers do? Do not sit back and wait and hope for the best. To sit back and wait for things to unfold is an incredibly poor strategy and one that gives complete control to others. I strongly encourage all Lactalis suppliers speak to all other processors and be blunt about what price would get them to immediately sign a contract with another processor. Most dairy farmers would tell you that given cost increases, anything less than a 3c/L price increase is tokenistic and not worth signing a contract for. Many Lactalis suppliers have already told me this is what they are doing.

I strongly encourage dairy farmers, both Lactalis and other dairy farmers, that if a processor is prepared to offer a reasonable price increase on this year’s price, be proactive and sign a contract with then immediately. There is a 14-day cooling off period that farmers can take advantage of after signing a contract. So, if another processor offers a higher price and the processor you signed with won’t match, you can rescind the contract and sign with someone else.

Processors who are proactive and prepared to offer reasonable price increases early must be rewarded with farmers signing contracts. If they are not, why would they bother offering a reasonable price? The answer is they shouldn’t.

The power is in the hands of every dairy farmer. Take advantage of this and sign contracts this week if a decent price increase is offered.

Eric Danzi, CEO eastAUSmilk

ACCC must block Coles from buying 2 Saputo plants

The ACCC is currently undertaking a review of the proposed acquisition of 2 Saputo processing plants in NSW and Victoria by Coles. We have this week put in a submission to ACCC outlining that competition will be significantly reduced by Coles becoming a processor and therefore the ACCC must block this purchase. We believe, like many dairy industry stakeholders including farmers and processors, if the Coles acquisition is approved it will substantially lessen competition in the market.

EastAUSmilk believes the impact on competition from this proposed acquisition is vastly different and far greater than one processor acquiring another processor’s facilities. It would give Coles the ability to destroy processors, processor brands and farmers by completely controlling the supply chain. It would allow Coles to abuse its power to completely control and destroy the market and its competitors. If approved, the northern dairy industry would be under significant threat including farmers, processors and retailers.

Some Saputo suppliers are very concerned that this acquisition could have detrimental effects on Saputo. It could cause Saputo to exit the industry or at least some regions which would have a substantial impact on competition. This would cause competition to decrease.

For the first time a processor would set the wholesale and retail price of their products. And alarmingly, a processor for the first time will be setting the wholesale and retail price of all their competitors. This will allow Coles to dictate the viability of all processors and their brands. Given the history of Coles destroying processor and farmer margins and viability historically, it is to be expected that they will do the same again.

EastAUSmilk will be discussing our concerns with the Federal government and asking them to intervene to block this proposed acquisition. We would like to see the government impose a substantial lessening of market power in the supply chain from Coles not let them further increase their power.

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

Welcome to eastAUSmilk Mike Smith

EastAUSmilk last week welcomed our new addition Mike Smith to our team. Mike will begin a part-time role as eastAUSmilk’s government relations manager. Mike replaces Shaughn Morgan who has been undertaking this role until his departure in April.

Mike has a long history of working within government, including within ministerial offices. He finished in government in recent months with his last job as the chief of staff for the Queensland water minister. Mike is extremely well connected within the Australian Labor Party throughout Australia which will be a great asset for eastAUSmilk with a Labor government in power in Canberra, Sydney, and Brisbane.

Mike has previously worked for QDO in a consulting role before returning to government over 5 years ago. Mike is extremely professional and plans his work in a thorough and methodical way. Mike is always very focused on his priorities and achieving outcomes in key outcomes for eastAUSmilk and dairy farmers in Queensland and NSW.

Mike will meet with the board of eastAUSmilk this week. Mike has developed a detailed document about how to lobby governments in Australia. It will be very useful for the board to better understand the keys to lobbying given how central this role is to eastAUSmilk. In addition, Mike has prepared a detailed government relations work plan that the board will review.

There are several key issues for eastAUSmilk that Mike will government on. This includes gaining funding for key projects for eastAUSmilk and solving the competition problems in the industry, especially between retailers and the industry. Also, the government’s appetite for transformational change to industry structures was the key outcome of the Dairy Plan which has to date been ignored.

Please welcome Mike to his role at eastAUSmilk. I expect Mike to be a valuable asset for eastAUSmilk, dairy farmers and our partners in the Queensland and NSW dairy industry.

Eric Danzi, CEO eastAUSmilk

Jade’s big holiday

Jade Chan started working with eastAUSmilk in December 2019 and has been a huge asset over the past 3 ½ years. Jade’s enthusiasm is infectious with both staff and dairy farmers alike, which has made her a very popular team member.

One of Jade’s first tasks was to take samples of manure for JD testing from 140 Queensland dairy farmers. This required Jade to work very long hours and do the glamorous task of picking up manure samples and delivering them to the laboratory for testing. Jade did this task with a smile and with her typically bubbly attitude she achieved the milestone that was set.

Since then, Jade has undertaken a range of tasks for farmers including helping farmers after disasters, with flood, drought, and other government funding applications. This has required Jade to speak to a lot of dairy farmers, get to know them and gain their trust, which is a huge achievement. Jade would travel to farms every week in different regions.

Dairy farmers in Queensland have come to know Jade well and she is extremely popular with a lot of the dairy farmers. Her infectious bubbly personality and her ability to help farmers on a range of issues has made Jade quite a hit with farmers.

Jade has gone on extended leave for a big trip to around Europe and the United Kingdom. I hope Europe and the UK are ready for Jade’s arrival. Have a wonderful time Jade and appreciate all of the rich history and diverse cultures you will experience along the way.

Eric Danzi and Lynelle Rogers, eastAUSmilk

Lismore Workshop

eastAUSmilk holds numerous workshops throughout the year and all members in the region where the workshop is being held are welcome to attend. Recently a workshop was held at Warren Gallagher’s farm at Ettrick in Northern NSW. Attendance was a little lower than anticipated, however there was still a good turnout of producers and industry representatives.

The day started off with morning tea to allow for some late arrivals, which gave everyone a chance to enjoy a coffee and to catch up with friends and introduce themselves to others, including our Vice President Peter Graham.

Paul Shewen talked about the Feedmaster feed mill, which provides fresh milled grain and additives efficiently and is a reliable feature of the farm. As well as alternative milling systems that are available and different configurations to suit different operations.

Scott Fisher from Skytech solutions discussed the types and features of drones including aerial spraying, seeding, imagery and NDVI mapping, as well as licensing requirements and costs. Afterwards he offered a demonstration of his spray drone which had surprisingly little spray drift when demonstrated with water, despite being a rather windy day.

Chris from Norco Agrisolutions showed the benefits of topsoil mapping, and how it can improve the accuracy of soil tests. Topsoil mapping can detect trace elements, salinity and pH levels as well as different soil types i.e., rock and clay.

The day wrapped up with a tour of the recently renovated calf shed, soon to feature an automatic calf feeder, with plastic slat flooring off the ground for easy cleaning and separate pens for each age group. Overall, the on-farm workshop went smoothly and was a great chance to network and catch up with current and potential members.

Letisha Johnson, Project Officer eastAUSmilk

What is abuse of market power by a retailer?

Retailers in Australia play God. They have so much power and dictate to everyone, especially those who supply products to them. It is virtually impossible for suppliers to stand up to retailers or there are likely to be serious commercial consequences.

In the dairy industry, Coles purchases milk directly from farmers in most states except Queensland and Northern NSW. Woolworths purchases milk directly from farmers in all states for their Farmers Own brand.

All retailers set retail prices for all products in their stores, which sounds fair and reasonable. Coles sets the retail price for Coles branded milk which they own and all other milk products on their shelves. Woolworths sets price for Woolworths and Farmers Own brands they own as well as all other brands on the shelf. Is this fair? Definitely not.

Retailers are able to dictate to all processors who have little choice but to do as they are told or fear losing shelf space, product lines or have the price of their product set higher than their competitors by the retailer regardless of the wholesale price, thus reducing sales. If this isn’t abuse of market power what is?

And now Coles wants to purchase 2 milk plants off Saputo Dairy Australia which are used to bottle Coles milk. This will give Coles complete control of the supply chain and give them further power against other brands. Surely this will not be allowed? It is up to the ACCC to decide whether it will be allowed based on whether it will reduce competition. Blind Freddy can see that this move will reduce competition. We can never forget the fiasco of $1 a litre milk and the damage it caused to the entire dairy supply chain and in particular farmers.

Rather than allow retailers to increase their market power and dictate more to its suppliers, the ACCC and the Federal Government should find ways to reduce their market power. A starting point must be stopping retailers setting retail prices differently for their own brands compared to others. Retailers should not be able to put a small margin on their own brands and then add a margin that is 5 times higher on brands they do not own for their own commercial gain, which is what they do now.

This problem of retailers dictating to suppliers is not just a problem for the dairy industry. It is a problem for every industry and company that supplies retailers. So, the ACCC and the Federal Government must acknowledge this and do something about it.

Eric Danzi, CEO eastAUSmilk

Time for truth in labelling

In February, the US Food and Drug Administration released draft guidelines on labelling of plant-based dairy alternatives, which the peak American dairy body National Milk Producers Federation has called inadequate and fails to remedy the problem.

In response, Republicans and Democrats from dairy States have introduced the US Dairy Pride Act, which is intended to correct unfair practices of mislabelling non-dairy products and enforce correct labelling.

What has occurred in the USA highlights a similar issue in Australia.

The Australian and New Zealand Food Standards Code states that milk is derived from the 'mammary secretions of milking animals'. It is not crushed 'nuts' mixed with water and then fortified.

Milk is of immense nutritional value containing 9 essential nutrients as well as calcium to build and maintain healthy bone strength for growing children and the elderly. This has been confirmed by numerous scientific studies.

In January 2017, I said consumers should not be confused between the nutritional value of cow's milk as against plant-based drinks.

This was confirmed at the time by the European Court of Justice when it ruled in favour of the need to differentiate between dairy and plant derived products.

Supermarket customers would benefit from 'truth in labelling' as it would allow greater consumer awareness about the nutritional differences.

To obtain this goal, it has been suggested that a voluntary code could be introduced.

Voluntary codes do not work. They are honoured more in the breach than followed. The mandatory dairy code of conduct illustrates this point about the need for proper enforcement as against voluntary codes.

It is time for federal government action to ensure existing regulations deliver accurate food labelling for products.

Of course, plant-based drinks should continue to be available for people who wish to buy such products whether it be for health style or medical reasons.

The correct labelling of 'milks' should occur now to ensure that supermarket customers can make informed decisions about the milk they buy.

Iconic dairy terms for dairy farmers should be protected.

This should not be so hard or take so long.

Shaughn Morgan, Past Co-CEO eastAUSmilk

The last 8 years…

This week marks the end of my time with eastAUSmilk and I wanted to take this opportunity to reflect upon the past 8 years of my involvement with the dairy industry.

Initially as CEO of Dairy Connect and since December 2021, as Co-CEO of the merged organisation of eastAUSmilk with my colleague and Co-CEO, Eric Danzi.

The formation of eastAUSmilk established a dairy advocacy organisation representing fresh milk producers in NSW and QLD.

This remains a pivotal step towards sustainability for dairy farmers in these 2 states, including the development of dairy policy, its implementation and united advocacy before government.

The past 8 years have witnessed many challenges.

Mother nature brought bushfires, droughts and floods. Yet, after every natural disaster, dairy farmers remained resilient and positive. Farms were rebuilt and cows replaced.

During these times, fellow farmers and colleagues provided emotional and mental health support to their fellow farmers and their families, which remains an ongoing challenge.

I participated in many positive dairy outcomes including the demise of $1/L milk, the introduction of the dairy mandatory code, recognition of 'truth in labelling' and involvement in parliamentary inquiries.

I am proud of these and other dairy initiatives.

Yet, the challenges and opportunities remain, especially with dairy farmers exiting the industry, milk production declining and rising input costs. All of which I have touched upon in past columns.

The steps undertaken in the coming months and indeed years will be pivotal to arrest the decline of dairy farms and milk production.

The opportunity in Queensland will be the development and implementation of the Northern Dairy Industry Plan with stakeholders and government.

The Plan's recommendations and outcomes must provide leadership to revitalise dairy within the subtropical region.

In NSW, the Labor government has committed to appointing an independent and statutory Commissioner for Dairy & Fresh Food. This is a positive and pro-active step.

The Commissioner will be at the vanguard for constructive and collaborative change and will set a standard for other states to emulate.

As I leave eastAUSmilk, I remain eternally optimistic for the viability of the dairy industry and its long-term sustainability. There is too much to lose for it not to be.

Finally, to those people who have provided me guidance and support over the past 8 years, I end by saying thank you.

Shaughn Morgan, Co-CEO eastAUSmilk

What are dairy opportunities?

The core business of dairy farmers is to produce fresh milk but what are the other opportunities?

Agri-tourism is one such opportunity. Building appropriate infrastructure or using existing housing to enable families to stay on a working dairy farm provides a number of advantages.

In addition to receiving revenue for people staying on the farm, it also provides a platform for education as to dairy farmers being strong environmental managers and that they care for their cows.

Maintaining a social licence within the community is vital to long term sustainability.

Another opportunity would be the growing of dairy beef, especially into the domestic and overseas markets.

Studies have shown that quality of dairy beef is of a standard equal to traditional beef.

In a study released by MLA and Dairy Australia in February, live dairy exports delivered $180 million to Aussie dairy farmers in 2020/2021.

Since deregulation, the number of dairy cows exported has risen from 20,000 cows to over 90,000 cows in 2021. Currently, the bulk of cows exported are primarily from Victoria, with Queensland providing only 1% of dairy cow exports.

However, dairy opportunities need to be found and this could be such a program.

Earlier this year, Fonterra New Zealand announced that they were introducing a 'no kill' policy for calves.

Fonterra said that the calves should be raised and sold for veal to meat processors or to petfood processors.

While such a policy is not in Australia, the sale of calves for veal should be further examined and recommendations made as to whether this is a viable option for dairy farmers in the northern states.

To facilitate this opportunity,  the board of eastAUSmilk has established a calf management committee, being chaired by board member Kay Tommerup.

In recent days, meetings have occurred with representatives of Queensland Department of Agriculture and Fisheries to progress ways in which to grow this as a viable market.

QLD DAF and eastAUSmilk will continue these positive discussions and discuss ways in which veal and dairy beef can be sold into overseas markets from Queensland.

If you might like to be a part of the deliberations and would like to join the calf management committee, please contact the eastAUSmilk office.

Shaughn Morgan, Co-CEO eastAUSmilk

What will politicians in NSW give dairy?

The NSW state election on Saturday 25th March provides an opportunity for advocacy bodies, such as eastAUSmilk, to seek commitments from politicians on behalf of its members.

This will be no different when Queensland goes to the polls on 26th October 2024.

In NSW, it is critical that government and the labor opposition recognises the pivotal role that dairy farmers play in the 'day-to-day' lives of its citizens and the nutritional value of milk for the community.

The current NSW dairy position is grim, with Dairy Australia showing NSW milk production declining in year-to-date figures of -11.8% for January and the number of dairy farms declining from over 1,700 farms in 2000 to under 500 dairy farms now.

What is required are forward-thinking, positive and collaborative election promises to address the underlying systemic issues within the NSW dairy industry.

The NSW labor opposition has committed to appointing a statutory and independent NSW Dairy and Fresh Food Commissioner to revitalise the NSW dairy industry.

The NSW labor opposition has promised that the Commissioner would oversee, in the first year:

• An effective mediation and arbitration process for NSW farmers in consultation with local industry and the ACCC (in conjunction with the mandatory code for dairy);

• A truth in labelling policy for dairy and fresh food;

• A model uniform national standard to deliver consistency in testing, sampling and the calibration of equipment used in fresh milk production to ensure a fair farm price;

• Review best practice business models, review contracts and plans for long term industry sustainability as well as better competition and succession planning for dairy families; and

• Convening a whole of dairy industry roundtable to review the state of the dairy industry and the 28 recommendations arising from the NSW dairy action plan.

This is an important and pivotal initiative. It is deserving of bipartisan support.

While the NSW liberal and nationals government has not made specific dairy announcements, it has announced increased funding to the Farm Innovation Fund, doubling the amount farmers will be able to access; as well as expanding fee-free training through its investment in upskilling and growing the agricultural workforce to livestock industry.

Prior to you voting on Saturday, ask questions of your politicians and be informed about what each political party will provide to agriculture generally and dairy specifically. Every vote counts for a long-term sustainable dairy industry.

Shaughn Morgan, Co-CEO eastAUSmilk

Time for whole of Dairy Supply Chain to get a fair go

Several years ago, QDO attempted to gain traction with a fair go logo for Queensland dairy farmers. Although very well intentioned, the program was not able to get off the ground. However, the underlying issue that the fair go program aimed to address has not gone away. That is the sustainability of dairy farmers is still at risk and there is substantial contraction of the industry across the country as a result.

How do we stop the contraction of the dairy industry? The whole dairy supply chain must be profitable and sustainable for the contraction to end. This includes dairy farmers in all states of Australia, dairy processors throughout Australia and the companies that transport milk from farms to processing facilities and then onto retail and export destinations. The whole of the dairy supply chain throughout Australia must get a fair go or the contraction and job losses will continue across the country on farm, in factories and in transport companies.

The Australian dairy industry lost 300ML in 2021/22 and is on track to lose 630ML in 2022/23. But we have some retailers and processors saying the price paid to farmers and processors should go down because the world price has gone down? This makes little sense in Australia where production has slid so far that we have gone from a major dairy exporting country to a net importer of dairy products.

Surely if there is a major shortage of milk the lowest valued uses included low valued exports will cease and the milk will continue to move to higher valued domestic uses? And surely the retail price of dairy products, including fresh milk products where almost 40% of Australia’s milk production is used for, must go up substantially?

Alternatively, the price can stay low, the industry will continue to contract and imports will increase further. And the imports are often from countries who subsidise their production, use drugs that are illegal to use in Australia and do not adhere to animal welfare standards applied in Australia. Is that really what consumers and retailers want?

Eric Danzi, Co-CEO eastAUSmilk

Continued Consumer Demand for Fresh Milk with Declining Milk Production

The January 2023 Dairy Australia milk production report continues to show both national and state decline in milk production.

National figures for January 2023 showed a 3.6% decrease on January 2022, with national year-to-date being down 6.6%.

The two largest fresh milk producing states also showed a decline in year-to-date figures, with Queensland production being -8.5%, while NSW is -11.8%.

Thus processors will need to ensure their continued supply of fresh milk for the coming year and beyond. This should therefore auger well when dairy farmers negotiate their milk supply agreements with their processor.

Rabobank's latest report 'Australia's Drinking Milk Markets: from Loss Leader to Improving Performer' indicates that the "liquid 'drinking' milk market remains of key importance to Australia's dairy sector - with improved domestic retail pricing and opportunities for further export growth".

This is based upon stronger and higher prices for fresh milk and other dairy produce in Australian supermarkets.

While Australians continue to consume fresh milk in high quantities compared to other nations, there has still been a reduction in the amount of milk being drunk over the past years. Dairy Australia figures have indicated that domestic milk consumption has fallen by 13% since 2012/2013 when Australians drank 106.7 L per person.

Total Australian fresh milk consumption contracted by 1.1% (about 36 M/L) in 2020/2021.

Rabobank dairy analyst, Michael Harvey, has indicated that this is not unique to Australia as many westernised economies have shown a similar trajectory to that of Australian milk consumption.

Rabobank's report indicates that "it's not all bad news for domestic dairy consumption, with consumers simply consuming dairy in different forms".

The report also goes on to state that there are also growth opportunities for exports of liquid milk, especially in the 'Greater China' markets. Total volumes of fresh milk in these markets have expanded by an average of 25% each year over the past decades.

Dairy farmers should enter their milk supply agreement negotiations in the positive knowledge that the need for nutritious fresh milk is in continued demand for both the domestic and export markets.

This, in conjunction with the safeguards afforded by the Dairy Mandatory Code, should enable dairy farmers to seek a strong and fair farmgate price for fresh milk.

Shaughn Morgan, Co-CEO eastAUSmilk

Embracing community collaboration in Northeastern NSW

EastAUSmilk staff Eric Danzi, Lynelle Rogers and I were invited to attend this month’s farm walk at Darryl and Coral Rose’s dairy farm in Goolmangar NSW. There was a good turnout of 24 people including other farmers, as well as representatives from Norco, Subtropical dairy and NSW Natural Resources Access Regulator and Rabobank. It proved to be an excellent opportunity to provide an overview of what we do, catch up with members and connect with other organizations in the area, as well as being great to see farmers supporting each other.

After some friendly introductions and a cup of tea, the group had an open discussion on the successes and challenges on their own farms. NRAR facilitated discussion on future water allocations and metering requirements as well as offering support to farmers planning ahead for likely changes. The use of drones was also discussed, and it was somewhat surprising to hear how widely they are used in the area when growing fodder crops, for spraying, fertilizing and even seeding. They have proven particularly useful when planting uneven paddocks and even more so when wet, where it would be difficult or impossible to work paddocks with a tractor. Future milk prices were also a topic of debate with little confidence in them either rising or falling, leading to some hesitance to make any major investments until they can be confirmed one way or another.

We visited several other member’s farms while in the area which was a great opportunity to visualize the different methods and goals of each and to help gauge areas where we can provide support and potential avenues to extend our services. Having only recently incorporated NSW into our member base, putting faces to names and understanding their individual goals and needs is invaluable for providing services where they are needed the most.

EastAUSmilk aims to hold an on-farm workshop at Lismore in April to facilitate additional discussion on key points of interest for our members, including a look at a newly installed feed mixer and calf shed, as well as topsoil mapping, RFID collars and drones for various uses. This is something we will be looking to continue across all regions in the future to promote new ideas and technologies within the industry as well as address any arising concerns from members.

Letisha Johnson, Project Officer eastAUSmilk

Individually Strong, Collectively Stronger

Over 600 dairy farmers and delegates attended the Australian Dairy Conference last week.

The conference was held for the first time in several years, and the attendance illustrated the collective need to unite.

The program was rich in content, ranging from the keynote address by the executive chairman of Bega Cheese, Barry Irvin, to presentations on the future of dairying in Australia (including opportunities), dairy farm succession, 'cattle, methane and climate' through to sessions on strong and effective advocacy to have our dairy voices heard, including enhancing the perception of dairy via mainstream and social media.

The attentiveness of the delegates showed a strong desire to seek the most up-to-date information available on these and many other matters that were discussed between the sessions.

The tone for the Conference was set at the beginning by the personal journey that Barry Irvin gave to those in the auditorium during his reflective presentation.

This was also a hallmark of the emotional journey shared by Lynn Sykes as she touched upon her many years of guidance for dairy farmer families as they transverse the perilous path towards farm succession.

Former federal MP Cathy McGowan discussed her 'kitchen table' approach to political discussion with her community. An approach that could be adopted in any number of federal and state electorates.

I raise these 3 speeches as they illustrate the personal side of advocacy, farming and the importance of 'collective mateship' amongst dairy families.

It is about personal interaction and being there for one another during natural disasters and emotional stress. It is about coming together and being there for one another.

Over the coming weeks, we will touch upon some other aspects from the conference sessions.

In the coming months, other dairy issues will be addressed by those directly affected, especially as dairy farmers begin the process of negotiating their milk supply agreement with their processor.

However, we will confront all these issues together. As we have in the past, as we have done now and as we will do in the future.

Shaughn Morgan, Co-CEO eastAUSmilk

All eyes on 1 June contracts

There is constant discussion in the dairy industry about the upcoming yearly frenzy for milk which officially starts on 1 June. Some contracts have already been presented including 3-year contracts in Victoria at around 90c/L.

It is unclear what will happen to prices from 1 July 2023. On the one hand, retailers are trying to contain price increases given the 30-year high inflation rates. In addition, world dairy prices are not as favourable as they were last year.

On the other hand, milk production in Australia fell by 300ML in 2021/22. Production has already fallen by around 300ML at the halfway point of 2022/23 so is on track to fall by 600ML for the year. Australian production will likely fall to under 8BL which is a far cry from the almost 12BL peak. The days of Australia being a large dairy exporter are well and truly behind us and we are now a net importer of dairy products.

So, what does all this mean for prices in July 2023? There are 2 options. The first is that prices only increase marginally from the 2022/23 prices. If this occurs, production throughout Australia will plummet and most likely a further 1BL of milk will disappear. Dairy farmers throughout Australia will not continue to produce milk for love and need reasonable profits to justify continuing. Can you blame them when there are many other options for their land that require much less work, risk, inputs and labour? No, you can’t.

The other option is we see substantial increases in prices to justify farmers continuing and for some expanding. Given a 15c/L price increase across Australia last year has still led to a 600ML loss, it is clear that a further increase in line with last year is required to stem the tide of milk loss.

But is plummeting milk production really a bad thing for the industry? Can’t processors remove their low valued lines and make the same money as they did previously? Well, that’s all great, but what happens if they weren’t making much money last year? And how do processors fulfill contracts where these low valued products are required if they don’t make them anymore? And if these low valued lines are removed, how many factories across Australia are shut down, how much do processors write down the value of their business and how many people are unemployed?

June will be a fork in the road time for the Australian dairy industry.

Eric Danzi, Co-CEO eastAUSmilk

Milk Production, Farmgate Price and the Mandatory Dairy Code

Milk production data has been released by Dairy Australia for December 2022. It shows a continued decline in milk production throughout Australian dairy States, as shown by the graph below:

Source: Dairy Australia (https://cdn-prod.dairyaustralia.com.au/-/media/project/dairy-australia-sites/national-home/pages/milk-production-reports/national-milk-production-report-december-2022.pdf?rev=0af5a5fc28e347b3a4bf498f2fc5f53f)

The data also indicated that national milk production for December 2022 "showed a 6.5% decrease on December 2021, whilst national year-to-date was down 7.1%".

These figures are concerning.

It has been suggested by some dairy commentators that the milk production for 2022/2023 may fall beneath 8 billion litres for the first time since 1992/1993.

Hence, the up-coming 2022/2023 milk supply agreement negotiations between dairy farmers and processors for a fair and profitable farm-gate price is essential for retention of dairy farmers within the dairy industry and increased milk production.

As negotiations begin, dairy farmers should review the safeguards provided by the Dairy Mandatory Code since it commenced in 2020.

Processors must place on their websites before 2pm 1 June their standard form milk supply agreements, which must be available for all to access. They must also provide pricing justification, be genuine and comply with the provisions of the Code.

Importantly, the Code is predicated upon good faith discussions in reaching an agreement and be in plain English.

While the Code does not set a minimum price, it does state for instance that a minimum price must be included in the agreement after consensus is reached. It also indicates that the agreement must have a cooling off period (14 days) and include a definite supply period with quality and quantity requirements specified.

This requires a level of trust and cooperation between the parties, which the Code has been restoring over the past years since the collapse of Murray Goulburn in 2016.

Being prepared for your negotiations and having access to the most up-to-date information is essential to reach a reasonable and transparent agreement.

The ACCC has published a fact sheet for dairy farmers which may be accessed at https://www.accc.gov.au/publications/what-the-dairy-code-means-for-farmers-fact-sheet

Further assistance is also available from dairy advocacy bodies like eastAUSmilk.

Shaughn Morgan, Co-CEO eastAUSmilk