Dairy

New trading platform plan

By Country News

A new dairy trading platform to improve flexibility, price transparency and more choice in sales contracts will be launched if the Coalition wins the federal election.

Under the proposal the Coalition would invest $560000 to have peak dairy group Australian Dairy Farmers undertake an independent research group to develop, consult and market test a new trading and marketing platform, reporting back in February 2020.

The announcement has been welcomed by ADF president Terry Richardson, who said it was a ‘‘logical’’ course of action.

‘‘As a farmer, I think this process has potential and is worth investigating, and we welcome this announcement from the minister (Agriculture Minister David Littleproud),’’ Mr Richardson said.

‘‘We are always looking for projects that could have substantial benefit for our industry.’’

A focus on giving dairy farmers more options was behind the proposal, according to Mr Littleproud.

‘‘We want to not only strengthen dairy farmers’ hand in negotiations with processors, we also want to provide farmers more choice in the way they interact with the milk market to give farmers more market power,’’ he said.

‘‘Dairy farmers currently have limited selling arrangements, basically a supply contract.

‘‘A new platform could allow dairy farmers to market their future supply, and give them options to get better prices and reduce business risk.’’

The Australian Competition and Consumer Commission in its 2018 review into the dairy industry found that a lack of farmer bargaining power was driving unfair and inefficient industry outcomes.

Under a mandatory code of conduct, farmers will also receive the right to sell milk to third parties, which will provide year-round competition driving industry efficiency.

‘‘The project will look at the potential for a farmer to sell milk to multiple processors, or contract a portion of their future milk supply as a hedge — with an option to pull out and sell elsewhere if the farmer receives an offer to pay more for their milk,’’ Mr Littleproud said.

‘‘Trading future supply is available to other agricultural commodities but the dairy industry has not modernised in the same way. Perishability is often flagged as the barrier but if more contemporary trading models can deal with this and provide more certainty and more choice for dairy farmers to market their milk, I am all for it.’’

The 2018 National Dairy Farmer Survey found farmer confidence in the future of the industry had dropped from 75 to 47 per cent during the past four years.

Alarmingly, 40 per cent of dairy farmers did not make an operating profit in the 2016-17 financial year.

‘‘It is imperative that farmers have as many options and tools as possible at their disposal as they collectively navigate this complex environment,’’ Mr Richardson said.