Dairy farmers priced out

By Geoff Adams

A recent inquiry into the NSW dairy industry has found producers are caught in a cost-price squeeze, leaving farmers to operate on the slimmest of margins.

The committee of the NSW Parliament has produced a series of recommendations.

The committee findings challenge the opinion of the ACCC that the selling of milk by major retailers at $1 per litre does not directly impact the price paid to farmers.

‘‘It is clear to the committee that the price being paid to farmers for their milk supply has not kept pace with the increasing cost of production,’’ chair Robert Brown, MLC, said after the inquiry.

‘‘The committee is particularly concerned by the evidence of farmers who told the committee that they cannot draw even a modest wage for themselves from their farming businesses.

‘‘While it is clear that recent drought conditions have added pressure to dairy farmers, the committee considers that the drought has not caused, but exacerbated, the structural problems within the industry that are resulting in poor outcomes for farmers.’’

This committee has found, based on the evidence before it, what is intuitive to even the casual observer and abundantly clear to farmers themselves: that retailers selling milk for $1 per litre has removed considerable value from the dairy value chain.

This has contributed to financial pressure on NSW dairy farmers.

‘‘Dairy farming businesses are clearly struggling to survive and this committee is greatly concerned both for the sustainability of the industry and for the wellbeing of farmers.’’

The Dairy Farmers Milk Co-operative advocated the role of collective bargaining groups for suppliers.

‘‘Individual dairy farmers have a low level of bargaining power when negotiating with processors,’’ their submission to the inquiry said.

‘‘We have all seen the recent example where a number of Western Australian milk farmers were abandoned by their current processor.

‘‘In DFMC’s opinion, an effective collective bargaining mechanism, both as to price and terms and conditions, is fundamental to the dairy market being fair to everyone (and, in particular, the farmers).’’

Finley farmer Ruth Kydd raised a number of issues in her submission to the inquiry, including the impact of red tape on farm efficiency, the unilateral cutting of her farm’s bore water licence, inconsistencies between management of Victorian and NSW groundwater, the bureaucratic paperwork involved in securing skilled worker visas, the management of the Murray-Darling Basin Plan and the power imbalance between farmers and processors.

After the release of the committee’s report, Mrs Kydd expressed some disappointment that some issues had not been addressed and she hoped that the committee’s wish for further time for a more thorough examination would be granted.

She said the committee’s investigation appeared to be rushed and did not visit the largest dairy production region in the state.

On the mandatory code for the dairy industry, Mrs Kydd said more control was needed to prevent bizarre practices such as requiring a new owner of a dairy farm to continue supplying milk to the same processor, or compelling suppliers to accept farm gate price reductions, but not having the benefit of price increases.

‘‘I was on the board of Dairy Connect for some time and we were told of some unfair practices which the bigger companies tried to adopt,’’ she said.

Mrs Kydd said the code should also require processors to have their milk testing laboratories independently tested for accuracy, because she had seen some evidence of variations between processors when given the same milk.