DFMC recently made representation to the latest Dairy Senate Inquiry. The matter was referred to the Rural and Regional Affairs and Transport References Committee in October 2019 for inquiry and the final report is now set down for November 2020.
The inquiry is into the performance of Australia’s dairy industry and the profitability of Australian dairy farmers since deregulation in 2000, with particular reference to:
the ability of Dairy Australia to act independently and support the best interests of both farmers and processors;
the accuracy of statistical data collected by Dairy Australia and the Australian Bureau of Statistics;
the funding of Dairy Australia and the extent of its consultation and engagement on the expenditure of levies revenue;
the merits of tasking the ACCC to investigate how it can regulate the price of milk per litre paid by processors to dairy farmers to ensure a viable dairy industry;
alternative approaches to supporting a viable dairy sector;
the introduction of a mandatory industry code of practice; and
any related matters.
The DFMC submission was made in person by Chairman Andrew Burnett and separate contributions from DFMC farmers from far north Queensland James Geraghty and Johnny Gallo. The following is a combined excerpt from Andrew’s submission.
It is DFMC’s view the major retailers have the ability to “loss lead” in some regions on a couple of product lines like milk, and make it up from the other 40,000 or more products lines sold. Further to this the cost of servicing smaller regional retail outlets is clearly much higher than metropolitan areas.
Generic milk now saturates the market with coffee shops, restaurants and school tuckshops using Coles and Woolworths as a wholesaler as it is cheaper to buy milk there than have it delivered. Shelf space, internal restocking and re-ordering policies all influence and manipulate the volume of generic milk that is sold in comparison to branded milk. Is this an abuse of market power, dumping, loss leading?
The dairy industry has been impacted materially from this national retail pricing approach. Acknowledging the different farming systems, farm sizes and regional, climatic issues, equals greater cost of production. Queensland has a farm gate price approximately 15cpl higher than Victoria. When coupled with a large regional footprint driving distribution costs higher, the fresh milk supply chain is not sustainable. The national retail price is actually lower than the cost to supply milk in and processors, and in turn farmers, are losing millions of dollars to stay in this market.
When I read through ACCC guidelines and legislation there is little to no reference to state or regional boundaries or acknowledgment of the difference in markets. It could be suggested that there are different markets for dairy commodities and fresh drinking milk, which has a more regional boundary for markets. The ACCC did find in some regions milk was sold at a loss. I believe that the “test” for dumping, loss leading and the abuse of market power, needs to be carried out on a state by state basis.
Dairy Farmers Milk Co-operative (DFMC) is informing members that DFMC directors Adrian Dauk and Bernice Lumsden have resigned from the Board. Both have moved on from DFMC to join other processors in response to an alternative offer which better suited their businesses at this time.
As South Australian-based milk supplier to DFMC and director, Adrian served initially on the Milk Pricing Committee and was appointed as deputy chair, Adrian is a passionate South Australian farmer with a growing business and worked selflessly on the board contributing to DFMC’s ongoing success. We are grateful for his involvement and support.
Adrian says “It’s been an incredible experience to be a part of the DFMC board for the past number of years and I have enjoyed the challenges that have been a part of the experience along the way. I always have had the Co-operative’s best interest at heart.”
Bernice has been DFMC Victorian director and also worked on the Pricing Committee. Bernice’s experiences outside dairy and on representative boards in the region were invaluable and she shared her business acumen and contributed in significant ways to the challenges faced by DFMC.
While it is unfortunate to see members and directors leave, our membership base is strong at around 340 across four states – and we plan to increase our supplier numbers in the Southern region in the coming months.
Would you like to have a bigger hand in helping to shape our co-operative? We have called for nominations to fill the casual board vacancies and the Board is looking for people who have, or would like to develop, skills in negotiation, strategy, and communication, and will consider people who have:
Interest and suitability to represent members in your region
A desire to lead
Ambition to make a difference for the benefit of their co-operative and fellow members
If you have any questions about the position, please contact chairman Andrew Burnett or Executive Officer Mark Kebbell
Through our members’ collective milk volume and capital, DFMC is in a strong position to manage our members’ collective milk supply, maintain a milk policy to ensure high quality product and importantly negotiate competitive pricing at the farmgate.
https://dfmc.org.au/wp-content/uploads/Board-positions.png5001200adminhttps://dfmc.org.au/wp-content/uploads/DFMC_Logo.pngadmin2020-08-26 16:04:112020-08-26 16:04:11Nominations open for DFMC board positions
It is well documented that 2020 has been a big year for change. The much-anticipated mandatory ACCC Dairy Code of Conduct is being implemented during this year and on 1 June all processors announced minimum pricing arrangements, and openly published their standard.
For the first time the whole of industry could see who is paying what milk price, in which locations, and for what period of time.
DFMC’s competitive milk price modelling program was instrumental for us as a business to help decipher and decode the sometimes complex nature of milk pricing announcements, contracts and policy documents. This helped DFMC build a very informed factual case for negotiations with our processing partner. In some regions this meant revising our prices and offering an increased price for some contracts.
It is DFMC’s view the mandatory Code has been a positive for the industry as a whole. There will be ongoing fine-tuning of the laws by the government but having a guaranteed minimum price for the full term of agreements is a positive. In some regions the reduction of multi-year agreements may not necessarily be a positive for long term on-farm investment, but we are working through this with Lion in the short term.
For our members still on multi-year agreements, DFMC will be working through a transition period with individual farms in coming months to ensure their agreements are Code compliant.
We’ve been invited by the ACCC to provide feedback on the Code and its implementation to date. If you have any recommendations or comments (good or bad), please feel free to let us know.
https://dfmc.org.au/wp-content/uploads/Code-of-conduct.png5001200adminhttps://dfmc.org.au/wp-content/uploads/DFMC_Logo.pngadmin2020-08-26 15:29:292020-08-27 08:55:23ACCC Dairy Code of Conduct update