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

EastAUSmilk Congratulates ACCC for Processor Prosecution

EastAUSmilk CEO Eric Danzi has congratulated the Australian Competition and Consumer Commission for action taken to ensure the integrity of the Dairy Industry Code of Conduct, by prosecuting Lactalis, a large milk processor operating in all states.

The Federal Court found Lactalis had entered into contracts with farmers, which included terms allowing Lactalis to unilaterally terminate agreements for irrelevant behaviour, including when, in Lactalis’ opinion, the farmer had engaged in “public denigration” of processors, key customers or other stakeholders. In other words, contracts were designed to smother dairy farmers engaging in public debate about their industry!

In some cases, famers have no say over the content of contracts, and must sign the contract drafted by the processors, to sell their milk.

The Court also found that Lactalis had breached the Code by failing to publish milk supply agreements on its website.

Lactalis was fined nearly $1 million.

A review of the dairy code is due now, and eastAUSmilk has called on the Federal government to make that review urgent, so loopholes which have become apparent since it commenced can be addressed, and it remains effective and relevant. They also believe it needs to address vertical integration in the dairy supply chain, to protect dairy farmers from potential misuse or market power, as well as minimum pricing in long term contracts, and several other improvements.

EastAUSmilk has met with Ministers or their offices, and departments, in the New South Wales, Queensland, and Commonwealth Governments, to press the need to review the Code now. They say this Federal Court finding, and substantial fine, proves that some milk processors won’t comply with their obligations under the Code, and will try to get away with breaching it if they can. They want a Dairy Industry Code which forces processors to change the culture of bullying farmers.

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

FBRP plans & workshops

Over the course of the last 2 years, eastAUSmilk has been involved in delivering workshops and assistance to dairy farmers in completing farm resilience plans and subsequent Drought Preparedness Grant applications. Since November 2022, we have completed 12 resilience plans in preparation for DPG applications and held five workshops across Qld and northern NSW. We are happy to report that this means we have met the milestone for the project and exceeded all goals for the last 6 months, and plan to continue in this fashion over the next two reporting periods.

Challenges faced during this milestone were mainly timing of workshops, as many farms were already busy with planting when the workshops were planned. This was combated in the last workshop by holding it at night as a dinner, and although this limited available speakers, we had a good turnout of 14 attendees on the night.

Heading into the new financial year we anticipate more grant applications from farms who have already completed their resilience plans, which not only allows them to refer to a plan in writing for events such as droughts, but also means that they can put through their applications much quicker as it only needs to be reviewed and updated rather than completing a new plan.

eastAUSmilk has had an excellent acceptance rate for the grant applications and we look forward to continuing to provide this service to our members over the coming financial year. We also plan to hold additional workshops which in future will be held as dinners to accommodate the busy schedules of our dairy farmers.

Letisha Johnson, Project Officer 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

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