Drought not to blame for the poor financial viability of dairy farming
Today the NSW Farmers’ Association will give evidence at the NSW Legislative Council inquiry into the sustainability of the dairy industry to highlight the precarious financial position of many dairy farmers, a supply chain rife with abuses of market power and unfair conduct, and present potential solutions to embed financial sustainability into the sector.
Australia can now only supply 8.8 billion litres of milk a year. We have lost more than 2.5 billion litres of supply in less than two decades, due to the lack of financial sustainability in dairy farming.
“Politicians should be concerned because we could have situations where fresh milk becomes unavailable to consumers for periods at a time,” said Colin Thompson, Vice Chair of the NSW Farmers Dairy Committee.
Uneven power dominates every business relationship of a dairy farmer, particularly their relationship with dairy processors, and often this power is abused.
“We have had absurd situations where farm-gate milk prices were being adjusted retrospectively; can you imagine that in any other industry or context?”
At the head of dairy supply chains sit supermarkets, which operate in one of the world’s most concentrated and uncompetitive retail supermarket sectors.
“The supermarkets have used their power and the lack of competition to squeeze the entire margin out of dairy supply chains, particularly with the introduction of dollar-a-litre milk, and unfortunately farmers bear the brunt of this squeeze.”
NSW Farmers has reached out to all major supermarkets to discuss a way forward on ensuring the viability of dairy farming. With the exception of Coles, all other supermarkets have at least engaged, which is a positive first step.
NSW Farmers believe that the ACCC is either asleep at the wheel or is not resourced appropriately to protect farmers from misuse of market power by these powerful supply chain stakeholders.
“The ACCC momentarily awoke from its years of inaction and were compelled into taking action by ludicrous dairy processor behaviour, including retrospective adjustments of farm-gate milk prices. Unfortunately the ACCC is again asleep at the wheel, turning a blind eye to questionable supermarket practices, including dollar-a-litre milk.”
While competition issues are a matter for Federal Government, there are actions that the NSW Government can undertake, including the establishment of the Office of the Farmer Advocate.
Without state and federal government action the future for dairy farming in Australia looks bleak.
“I have adopted the very latest in dairy methods and technology, increasing individual cow production to almost 3 times the national average. Even with this, I have grave concerns as I see production costs increasing at an alarming rate while milk prices are artificially kept low by loss leading discounting practices by supermarkets.
“The drought is not the cause of my financial concerns; it merely demonstrates how the financial resilience has been sucked out of dairy farming by processors and supermarkets,” Mr Thompson concluded.
Date: Friday 16 November 2018
Media Contact: Kathleen Curry | Public Affairs Director | 0429 011 690