Some farmers are carving-out their own future as Australian dairy looks to regroup. Simone Smith reports.
If you keep doing more of the same, you can’t expect a different result.
That was the opinion of Brad Couch a dairy farmer in south west Victoria and the chairman of newly formed co-operative South West Dairy Limited (SW Dairy Limited).
SW Dairy Limited was launched in late January and the group of “seasonal” farmers in one of the higher rainfall regions of Australia’s premier dairy state, has been recruiting members.
The group wants milk price equality, payment transparency and a farmgate price structure – which among a number of different things – doesn’t discount milk produced during spring.
SW Dairy Limited plans to pool its member’s milk and is searching for a processor to manufacture it and agree on its payment guidelines.
The group defined price equality as “all farmers receive the same price, regardless of size” which rules-out payment incentives linked to productivity and farm size. In its call for transparency, SW Dairy Limited wants farmgate returns to better reflect commodity prices.
“Commodity prices don’t drop 50 cents a kilogram of milksolids through the spring months,” Brad said.
“Over the last five to six years fat and butter have been more highly priced than skim milk powder, so we think values can meet somewhere in the middle for fat and protein.”
When NZ Dairy Exporter spoke with Brad he was down the paddock fixing one of his windmills.
It’s a movement from “grass roots” farmers, like himself, that he says will encourage younger people into the industry and drive onfarm profitability.
“We want a sustainable, prosperous dairy industry and you can get this by improving cash flow and profitability,” he said.
“All the research that’s been done in New Zealand, Ireland and even Australia will back-up the claim that the cheapest milk to produce is straight off grazed pastures and the majority of regions in Victoria – in particular – grow pastures through spring months. Unfortunately, when the milk price during the spring months is discounted, in a way it has discouraged profitability and encouraged high costs onfarm.”
Brad wouldn’t reveal the volume of milk recruited by the group but said it was “growing”. In time, the group hasn’t ruled out building its own manufacturing plant.
For Dairy Australia analyst John Droppert, the proposal from SW Dairy Limited mirrors the “fragmented” feeling in the Australian dairy industry.
“It shows that there’s still a lot of disharmony out there, there’s not one universally agreed way to do it,” he said of milk pricing and payment.
“From what I understand, they have gone down this pathway because they don’t agree with how the milk is priced month-to-month in Australia. They have tried to set up something different. But there’s obviously a lot of people quite happy (with the current payment system) they are participating in it and driving it in (it’s current direction). To me, this shows the fragmentation that’s still out there.”
But SW Dairy Limited isn’t the only group of farmers who have opted to take control of their own destiny in recent years.
In the north east corner of Victoria a group of local dairy farmers created the Mountain Milk Co-operative. The group, in the Alpine Region of the state, were spurred to action following the collapse of Australia’s largest dairy co-operative Murray Goulburn.
For the past 18 months the group has supplied its milk to processor Freedom Foods. Its annual milk pool is 23 million litres.
Sustainability, innovation and education are at the heart of the co-operative and the dairy farmers want to make sure they also give-back to their communities.
Mountain Milk Co-operative chief executive Patton Bridge said co-operative members were happy with the structure and the focus was now fostering this confidence to encourage investment.
“They are working together, collaborating, holding on to a lot of information and sharing it amongst members,” he said. “There’s a very strong confidence in the business and the future of their investments in dairy.”
APPETITE FOR CHANGE
Groups of the Australian dairy industry have been critical in the past few years of the way some processors pay for milk.
The Victorian dairy lobby group, the United Dairyfarmers of Victoria (UDV), even launched its own “simplified payment structure” two years ago. Among other suggestions, the UDV system included a flat price for nine months of the year and a price of $1.20-$1.50 a kilogram of milksolids less during spring.
A contrast to some existing payment systems which had different prices for different months and rewarded those who produced larger percentages of their milk outside of spring, with higher farmgate prices.
Aspects of the UDV payment system were taken on board by some milk processors – some had even altered payment structures before the UDV flagged its plan. But at its heart, the Australian dairy industry is geographically diverse with varied production systems, supplying different markets and the way milk is paid for reflects this.
Adding to the discussion was the proposal for a Dairy Code of Conduct. This was introduced on January 1 by the Federal Government competition watchdog The Australian Competition and Consumer Commission (ACCC). The ACCC said the code aimed to “improve the clarity and transparency of trading arrangements between dairy farmers and those buying milk”.
The code was a result of a Federal Government directed inquiry, launched in October 2016, in the wake of mid-season farmgate milk price cuts led by Australia’s two largest milk processors.
The code’s first real test will come when negotiations for the next supply season kick-off in coming months.
This comes against the backdrop of a shrinking Australian dairy industry.
The latest production figures from Dairy Australia revealed year-to-date total national production at December was tracking 4.3% down at 4.877 billion litres when compared to the same six-month period in 2018.
Australian production in 2018-19 was 8.793 billion litres and it was the first time in more than 20 years the nation’s dairy farmers produced less than 9 billion litres of milk in a year.
Years of upheaval and change prompted an industry review and the evaluation is due to be released this month. Called The Australian Dairy Plan, it’s been pitched as a document to create a “blueprint” for the future of the industry.
According to its website, the more than 1500 farmers, service providers, processors, retailers, investors and other key stakeholders participated in the consultation.
There were 5213 registered dairy farms in Australia in 2018-19 according to Dairy Australia.
Underpinning the plan are the aims to create a more profitable, confident and united industry.
Back on the farm, in south west Victoria, the question of a united industry was something put to SW Dairy Limited’s Brad Couch.
“That’s a hard question to answer,” he said.
“I’d like to think so, in our group (SW Dairy Limited) travels we’ve seen it is an extremely fragmented industry and it is sad. In our way we are united, in our little group, and it might take-off in other regions and flick the industry circuit breaker.”
