Bega bosses told farmers need good incentives to grow milk pool
Dairy processors have been told to stop moaning about Australia's high farmgate milk prices and shrinking production volumes and focus on ensuring farmers continue receiving the financial incentives they deserve to stay farming.
"The big costs involved in running a dairy farm are no different to running a dairy company - we need a fair return to stay in business," a frustrated farmer shareholder told Bega Group's annual general meeting this week.
While congratulating the national dairy and grocery business for rushing to adjust prices to as much as $9.55 a kilogram (milk solids) in the past two years as processors scrambled to secure enough volume, he was fearful recent price peaks may be short-lived.
Too often dairy farmers were simply paid "what's left" after shareholders and processing costs took their cut, he said.
Yet, even dividends to Bega's farmer suppliers, who represent a big portion of its shareholder base, "didn't cut the mustard".
He foresaw more farmers quitting dairying if processors were not more proactive and offered next generation producers a future with income and investment security.
Andrew Marshall, Queensland Country Life, 26 October 2023.
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Noumi’s $30m AFMH farming exit gives Perich, New Hope equal stakes
The tussle between China's biggest agribusiness and Australia's biggest dairy industry family over who gets an extra 9.4 per cent stake in big dairy farming venture Australian Fresh Milk Holdings has ended with both parties taking something home.
Dairy and plant protein processor, Noumi, will be paid almost $30 million as it officially offloads its foundation stake in the farming business today.
Noumi is Australia's biggest long life milk processor whose brands include Australia's Own, Vitalife, So Natural and MilkLab.
Its ties to Australian Fresh Milk Holdings date back to a four-way partnership established in 2015, which has grown into the giant 6200-milker operation, Moxey Farms, in NSW and northern Victoria.
Noumi shareholders last week voted to sell 53pc of its AFMH stake (11.5 million shares) to the Perich family's Leppington Pastoral Company for $16.7m and almost 44pc (8.9m shares) to NewAustralia, a subsidiary of China's big New Hope Group, for $12.9m.
The wash up means the Perich family, which is also a long-time majority Noumi stakeholder and has its own farms running about 2000 dairy cows south west of Sydney, now holds an equal 43.2pc of AFMH with New Hope.
The remaining third stakeholder, the Moxey family at Gooloogong in Central West NSW, stays at 13.6pc.
AFMH produces 180m litres of milk annually on farms in NSW's Lachlan Valley and near Shepparton in northern Victoria and has a 4000-hectare Murray River heifer raising aggregation west of Echuca.
This year its farming interests also expanded to include the Ladysmith Feedlot and associated fodder cropping country near Wagga Wagga.
Milk from its farms goes to Noumi, Bega Dairy and Drinks and the A2 Milk Company.
Last month Noumi looked set to sell all its AFMH shares to the Perich's Leppington Pastoral for about $28.6 million, or $1.40 each.
However, New Hope's NewAustralia subsidiary, upped the stakes to offer $1.45 each, giving the shares a total value of $29.65m.
Until now NewAustralia had been AFMH's largest shareholder by a slight margin, but the parties settled on dividing Noumi's portion to leave both bidders with an equal ownership footing.
Perich investment
In addition to an enlarged AFMH stake, the Perich's have been at the forefront of funding a turnaround in Noumi's business fortunes after the processor almost collapsed under the weight of an accounting and inventory scandal and management shakeup in 2020, which required a $265m recapitalisation.
The Perich family currently holds 52.5pc of Noumi, while former dairy farm manager, Michael Perich, has been managing director since the sudden departure of Rory Macleod two years ago.
The family also owns cropping country at West Wylong, big parcels of former dairy farmland being developed for housing at Oran Park, part of the Narellan Town Centre shopping precinct and dairy factory assets.
Noumi's exit from AFMH will help pay a total $25.7m in quarterly installments over four years after the company last year settled a legal dispute with US almond marketing co-operative, Blue Diamond Growers, over unpaid accounts, and licence fees for use of its brand in Australia.
Good result
Company chair, Genevieve Gregor, said the AFMH share sale would reap a return to the processor at the upper end of an independent valuation which had ranged from $1.32/share to $1.49.
Only 3.1pc of Noumi shareholders opposed the sale at last week's extraordinary general meeting.
If the sell-off had been rejected, Ms Gregor said Noumi would likely have been forced to divert its operating cash flow to fund obligations to Blue Diamond Growers.
"This would not be ideal," she said.
"It would reduce the company's available liquidity and would constrain our ability to fund our transformation and growth initiatives."
About $4.6m left over after covering the Blue Diamond commitment will be used to cover Noumi's other general expenses.
Ongoing challenges
Those expenses include other ongoing legal wrangles with shareholders who launched class actions against Freedom, and coffee merchandiser, Sunday Collab International, which claims Freedom reneged on plans for a MilkLab distribution deal to Europe and wants $24.7m in compensation.
Australian championship surfer, Joel Parkinson, a partner in Sunday Collab who helped negotiate his business' MilkLab plan for Europe, is seeking to recover losses suffered as a result of Noumi allegedly walking away from the 2019 agreement and refusing to communicate further.
Noumi had apparently delivered Milklab products and marketing and packaging materials for brand launches in Italy in late 2019 and at London's Coffee Festival in early 2020.
In a media comment last week Sunday Collab said following Noumi's management and board spill in August 2020, the processor repeatedly denied there was any partnership in place, or any obligation owed to the coffee business.
Noumi has described Sunday Collab's claims as without merit and unsupportable and said it would defend the action in the Supreme Court of Queensland.
Budget’s farm technology treat set to drive digital investment rush
The farm sector's hunger for new technology is about to get even hungrier over the next 12 months.
Treasurer Josh Frydenberg's federal budget has promised a 120 per cent tax deduction on all things digital - from upgrading the farm internet to buying new mobile phones, GPS gear, or remote water management devices.
Farms and other agribusinesses with annual turnover of less than $50 million will be able to claim a deduction for expenses and depreciating assets associated with boosting their uptake of digital technology.
The bonus deduction, for a maximum annual spend of $100,000, includes opportunities to upgrade bookkeeping and invoicing software to cloud-based systems and beef up the farm's cyber security to better protect them from hackers and scams.
It also extends to the cost of external training to upskill staff.
"The ag sector is very much attuned to the benefits of investing in new technology," said Albury-based director with the RSM Australia accountancy group, Gerard O'Brien.
"Farmers are willing to spend money on gear if it helps lift efficiency and productivity, especially if a $100 investment qualifies you for a $120 deduction when you submit your tax return.
"That's a pretty good deal if you're pay $20,000 or more for new GPS gear to improve a tractor or header's accuracy, or installing automatic gates or water management systems."
Mr O'Brien, himself a farmer, said the biggest limitation to the federal budget's technology incentives in the bush was the current reliability of digital network connectivity.
Pleasingly, however, Canberra was also promising $480 million to expand and improve the nbn network and $812m to improve regional mobile coverage and affordability.
What's 120pc worth?
However, South Australian accountant, Megan Inverarity, cautioned that a tax 120pc deduction would not equate to business owners receiving a simple government payment in their pocket.
"If you spend $1000 you qualify for a $1200 deduction based on your taxable income rate," said Ms Inverarity, a director with the Murray Nankivell firm at Naracoorte.
"That works out as a $420 saving on your tax bill for somebody paying a typical mid range tax rate of 35pc."
Importantly, to qualify for a digital training expenses tax deduction, all training had to be done externally, not in house.
Immediate relief
A more immediate benefit to farmers' wallets will be the federal government's six month cut to its fuel excise charge, pruning the cost of petrol and diesel by 22 cents a litre.
Although the government already repays the excise it collects on fuel used on farm, Mr O'Brien said producers still had to carry the full purchase cost until their next quarterly tax statement was submitted.
"If you don't have to pay quite as much in the first place it makes quite a bit of difference to your cash flow position, especially if we're talking about a 10,000 litre fuel delivery worth $15,000 last month, and a lot more last week," he said.
"Filling up the ute in town will be noticeably cheaper - at least $20.
"Paying less than $100 for a tank of petrol will be a pretty good feeling these days."
Australian Small Business Ombudsman, Bruce Billson, said halving the fuel excise would go some way to easing this key input cost, particularly for the transport sector and the freight supply chain.
The savings would not flow through to service station stations for a couple of weeks, but the Australian Competition and Consumer Commission was already watching to see prices respond throughout fuel supply networks.
Ms Inverarity said the budget was clearly focused on easing the rising cost of living, with short term measures being a notable feature.
"It wasn't terribly ground breaking, but I did not find myself doing much cursing on budget night this year."