Electricity charges increase 324%

By Ross McInnes, QDO Vice-President

If a dairy farmer wanted to increase their return on investment, considering that their income cannot increase due the fixed nature of supply contracts, one creative way would be to devalue the farm assets to make the imaginary returns look better.

If the electricity industry wanted to make more money, but the regulator set the rate of return, the creative way to achieve this would be to inflate your asset value so in turn higher rates can be charged for maintenance. This is the kind of creativity Queensland’s electricity sector has been thriving on for some time now.

This has resulted in unmanageable increases in electricity charges for rural industries year after year that appear not to have any no end.

Consecutive Queensland Governments squeezed unsustainable performance dividends from the electricity industry. This resulted in a substantial long term underinvestment in the electricity network requiring a surge in network charges to compensate for the overdue catch-up maintenance.

Because network charges began to form a larger proportion of the total cost, the Queensland Competition Authority (QCA) formed the view that off peak charges were suddenly being overly subsidised. For irrigators trying to minimise costs and increase water use efficiency, this resulted in the unsustainable increases seen over the past decade.

In December 2008 the off peak charge was 7.1 cents per KWh. The current charge is 23 cents per KWh– an increase of 324%. This level of increase regardless of the industry is totally unacceptable. A farmer operating one 30KW irrigation pump, 10 hours a night 5 nights a week on off peak power is paying $238 per week more than 2008 on that component of the bill alone. Minister Bailey needs to explain where we are heading with prices for the next decade.

More than a decade ago, then Premier Peter Beattie promised cheaper electricity by bringing in more competition. However, when prices spiked, the Premier’s excuse, reminiscent of a line from Animal Farm, was simply, “prices are cheaper than if we had done nothing”. Sadly, this same dismissive attitude still dominates the Government’s response to this crisis.

QDO News 17 February 2017

Milk, yogurt and Asia boosts Lion

Lion’s national dairy and drinks division has seen growth of its flavoured milk brands and south-east Asian trade. The company’s full-year result showed overall operating EBIT of $694.3m with a lift in operating net profit of $11.7m to $280.1m. The figures reflected Lion’s departure from low margin commodity cheese and the loss of some private label milk contracts. However, there were strong performances from the higher margin milk-based beverages category, with Dare Iced Coffee drink reporting a 9.9% increase in volume. In the yogurt category, Dairy Farmers Thick & Creamy reported 12% growth year on year, and Farmers Union Greek Yoghurt experienced 13% year on year growth.

Heat/humidity kills 50 cows

In NSW, up to 40 dairy cows in the Shoalhaven region died during the weekend due to the excessive heat and humidity. Five farms reported stock losses, with one farmer reporting to have lost 3% of his herd. It is reported that at least two farms each suffered 15 or more deaths. Locals reported temperatures of up to 45 degrees. Nowra hit a record high of 42.6 at 2.50pm. Humidity was up to 90%. RSPCA spokesperson Stefania Kubowicz said extreme heat, combined with high humidity meant the animals weren't able to cool themselves.

 

ACCC gets message loud and clear

By Brian Tessmann, QDO President

Farmers at the Toowoomba ACCC Dairy Inquiry

Farmers at the Toowoomba ACCC Dairy Inquiry

Over 100 dairy farmers attended Australian Competition and Consumer Commission (ACCC) Queensland hearing in Toowoomba last week and around 200 dairy farmers packed the recent New South Wales hearing in Taree. The size of these turn outs shows just how frustrated and desperate dairy farmers are to see governments address the current market power imbalances plaguing the industry.

While dairy farmers primarily laid the blame on the major supermarkets $1 per litre milk for the gutting of value from the dairy supply chain they also took aim at other market power imbalances. High on this list was the lack of transparency in the industry value chain which resulted in difficulties when negotiating farm gate prices. Inconsistent and varying contract terms reduced farmers’ market options, including the ability to easily transition and change between different dairy processing companies, lowering farmers’ negotiation power.

Additionally, most milk supply contracts currently claim exclusivity of supply so farmers are unable to supply milk to a local cottage dairy manufacturers. These lost opportunities impact upon local communities and dairy farmers’ abilities to diversify their income.

There was widespread disagreement on the figures processors had been used for setting farm gate price when costing milk sourcing and transporting. Examples of this have played out in the ongoing Parmalat farm gate price negotiations.

At the end of the day the message was clear. It was the same message Queensland Dairyfarmers’ Organisation (QDO) gave at the Senate inquiry, that it’s time for both state and federal politicians to stop sitting on their hands and listening to the supermarkets and large milk processors. It is time to take action and give farmers the opportunity they have been crying out for, a fair go.

Listening to the heads of large companies only interested in short term corporate gain will only spell bad news for our dairy industry. It is time to give farmers the power to rebuild the Queensland and the Australian dairy industry otherwise consumers will no longer have access to local fresh milk.

Dairy Inquiry given fair market message

By Brian Tessmann, QDO President

After the turmoil of last year’s southern dairy crisis, both state and federal governments committed to conducting investigations into the state of the dairy industry. The purpose of these was quite clear, ensure that the dairy industry doesn’t simply become historical footnote.

One such inquiry is the Senate Economics Reference Committee that recently held a hearings at the Royal on the Park Hotel in Brisbane on Tuesday the 31st of January. Queensland Dairyfarmers’ Organisation (QDO) was called as first witnesses for the day after the submission we made earlier this year. At the committee QDO prosecuted the case for Queensland dairy farmers to be given a fair go by highlighting the damage caused to domestic suppliers by $1 per litre milk by Coles in 2011.

When asked if QDO wanted a return to a regulated market, we were very clear that we did not. However we again reiterated our support for rebalancing the current market to deliver free fair markets where farmers had more bargaining power. We drew attention to the fact that in almost every other western economy that retailers often had less control and farmers had more bargaining power.

Dairy Connect, Premium Milk and Norco Co-op each proceeded QDO and took time to answer the Inquiry’s questions. The major theme throughout their sessions was ensuring that the industry and processors continued to deliver upon consumers expectations of high quality local fresh local milk. This for each of these dairy groups meant continuing to deliver and produce local milk for consumers rather than milk trucked hundreds from down south. Senators were also told that for every litre of milk lost in Queensland production meant there was less from down south available for export.

As QDO and the local dairy industry completed yet another inquiry hearing into the sector our hopes turn to seeing some action and results for our farmers, rather than just continued talk. We need to ensure we have a fair market for the sake of our consumers, our farmers and economy.

ACCC accepting confidential submissions

The ACCC can accept a claim of confidentiality if the disclosure of the information would damage the farmer’s competitive position. If the ACCC is satisfied that the confidentiality claim is justified, it must keep that information confidential unless it considers that disclosure of the information is necessary in the public interest.

If farmers wish to discuss this process further, they shouldn’t hesitate to contact the ACCC at dairyinquiry@accc.gov.au or on 02 6243 1280.

They may also make written submissions to that email address, or speak to Mark Laybutt on 02 6243 1280 or Amy Bellhouse on 03 9290 1997 to make a submission over the phone.

Your chance to tell the ACCC

By Brian Tessmann, QDO President

Farmers often tell me how much they’d like to give the Australian Competition Consumer commission (ACCC) and the Government ‘a piece of their mind’. Well, for farmers in southern Queensland, you now get that chance. The ACCC Dairy Inquiry into competition and market fairness in the dairy supply chain is giving individual farmers the opportunity to have their say at a public forum being held 11.30am, Monday 6th February 2017 at the Toowoomba Golf Club. 

This ACCC inquiry is one of a number of investigations into the dairy industry that will hopefully deliver the much needed changes required to the disproportionate levels of market power in the industry. In fact, as I write this I am also preparing to appear at the senate committee inquiry on behalf of Queensland Dairyfarmers’ Organisation (QDO) inquiry being convened in Brisbane.

The major issues that need to be raised at all inquiries are the continued strangle hold and abuse of market power by the large retailers and the fairness and equity outlined in all contracts between processors, retailer and farmers. In particular scrutiny should be applied to how prices are determined alongside supply conditions imposed as part of milk supply contracts. QDO in particular takes exception to the inequitable power imbalance that is created through the exclusivity clauses and processors ability to alter prices every six months without re-negotiations.

At the end of the day, as with all inquiries and investigations, we have assurances that there will be a number of findings and recommendations. What we cannot assure on however is that the governments will listen to its own investigations and to act on them. Even though Agriculture Commissioner Mick Keogh has assured us that ‘this is different to the others’ and that the ‘ACCC inquiry has teeth’, time will have to tell.

All we can do as farmers is get out in force and make sure our voices and opinions are listened to when the ACCC comes to town and make sure the message is clear on what is broken and how to fix it.

QDO Weekly Update News - 27 January 2017

Dairy price predictions shift upwards

Dairy market analyst Freshagenda is upping its southern 2016/17 southern Australian price range to $5-$5.40/kgMS, up from $4.80 to $5.20.

Director Steve Spencer said: “For the 2017/18 season, further significant improvement is expected as the strong lifts in product spot values are locked into export and wholesale prices, giving a forecast range milk price between $5.90 to $6.30/kgMS. The drop in global milk output will start to reverse in mid-2017 but take some time to impact product values.”

…AND: Barry Irvin, Bega chair: “In difficult years it is always challenging to talk about business growth but it is my strong belief that that is exactly the time to do so…The current global industry circumstances have changed from significant over-supply to a more balanced supply/demand regime. Price improvements are looking more sustainable, input costs are improved and there are a number of reasons to have a positive view on 2017/18 industry circumstances.”

Dairy levy poll put out to pasture

The 2017 dairy levy poll has been put out to pasture, with the poll advisory committee ruling it unnecessary. The 15-member Dairy Levy Poll Advisory Committee made the decision after receiving a report and recommendation from Australian Dairy Farmers and Dairy Australia that there be no change in the levy rate. The decision can be challenged with a petition from Group A Dairy Australia members who combined paid 15% of total levies in the previous financial year. The last time the five-yearly vote was held, in 2012, it cost $720,000. Lobby group Farmer Power has reportedly started a petition seeking a 0% levy rate.

 

Milk producers fear shakeup

By Brian Tessmann, QDO President

Farm gate contract negations between farmers, represented by Premium Milk, and dairy processor Parmalat are headed towards dispute resolution. The worst case scenario would be an outcome that delivers a further collapse in farmer confidence and long term damage to Parmalat’s traditional brands support from consumers.

Media reports over the past two weeks noted that if Parmalat is successful in having arbitrator agree with their proposal for a drop of over 1.5 cents per litre then it will collectively cost the 190 Parmalat suppliers, who make up nearly 50% of Queensland’s dairy farmers, more than $3million in lost revenue.

This farm gate price drop will send financially struggling dairy businesses over the edge. Others will look for either a new processor or a new enterprise for their farm. The sad reality is that $3million is a drop in the ocean for a processor who has now spread its business into every mainland state, yet is has the potential to unravel a substantial portion of the Queensland dairy industry.

Queensland Dairyfarmers’ Organisation (QDO) want to thank the other northern processors who last year decided to hold their farm gate prices. The question still remains however, whether or not processors will remain fair dinkum about sourcing milk in Queensland or whether they want to see the local industry wither so they can truck milk in from down south.

This entire issue would be resolved if as an industry we stopped trying to transfer the current shortfalls that continue in an industry where milk continues to be undervalued and sold at unsustainable low prices. This turmoil and buck passing could be avoided if the major supermarkets raised the price of milk and transferred this value onto the processor and farmers.

Telcos not meeting user expectations

By Ross McInnes, QDO Vice-President

Credit: Fairfax media

Credit: Fairfax media

I certainly hope that Minister for Communications Senator Mitch Fifield, Telstra Chair John Mullen and Telstra CEO Andrew Penn had a wonderful Christmas with family and friends.

And I am quite sure if they were near a shop, they would have been able to buy fresh milk anytime, anywhere. It is this strong and reliable relationship between dairy industry and consumers that continues to deliver upon the community’s expectation that fresh milk always be available.

After the 2011 floods milk was in short supply in many shops due to the very real physical barriers present during the disaster. This shortage fuelled competition for product that the community was not used to having in scant supply.

Given our increasing reliance on smart phones telecommunications technologies, there has developed a similar expectation from consumers for this product to be available every minute of every day.

For most of December, everyone in my region (The Scenic Rim) using their mobiles turned into a running joke as to how many minutes before the phone cut out. I personally had one day when the phone cut out 22 times making 4 phone calls.

After talking to my telco I was assured that the problem would probably be fixed within 3-5 working days. Taking into consideration the holidays and weekends during the festive season it had the potential to blow out to 12 days before the issue was fixed!

I wonder what the reaction would be if there was a breakdown in the dairy supply chain and farmers and processors said, we will rectify the problem in 3-5 working days? The consumers rightly would be absolutely livid.

So, is it fair and reasonable to accept this level of services from the telecommunications sector when there is clear expectation from consumers for a 24/7 service, just like milk.

I am sure that while Messer’s Fifield, Mullen and Penn were all able to enjoy fresh milk for their coffee each morning. It’s just a pity that everyone in my region had their expectations let down through the “call failure” screen on repeat. 

Queensland represented at International Dairy Week

Report from QDO State Councillor, Joe Bradley

QDo State Councillor Joe Bradley

QDo State Councillor Joe Bradley

The annual Australian ‘International Dairy Week’ showcase was held this week again in Tatura, Victoria with attendance from all around the country. Dairy industry members and farmers came together to discuss, enter dairy cattle shows, attend field days and network. Many of the breeding societies too are holding meetings and events throughout the week. The IDW includes dairy cattle showing competitions, including a popular youth category.

Queensland Dairyfarmers’ Organisation (QDO) South East Councillor Joe Bradley was there in his capacity as Brown Swiss Australia President.

Mr. Bradley said there were many commercial and industry figures from Queensland at the IDW event. “It is a great opportunity to share our passion for the animals, the products we produce, the process and the industry as a whole.”

“Events like IDW remind you that you are a part of community that is not only all around Australia, but all around the world.”

“It is so great to be down here with other Queensland dairy farmers celebrating our industry and learning a few things at the same time.”

Joe Bradley is a dairy farmer from Dayboro just 30 km north of Brisbane.  He is passionate about his Brown Swisse cows and currently milks 190 cows. The majority of Joe’s feed comes from brewer’s grain and as a result he has recently moved from supplying Parmalat to lion to reduce the cost of purchasing brewers grain.

International Dairy Week (IDW) Australia is a forum to showcase the latest developments in Australian dairy cattle, farming practices, dairy knowledge, breeding and genetics, machinery, equipment and technology, environmental management and services.  Held during the third week of January each year IDW is the place to be for all dairy farmers, breeders, producers, companies, organisations and others operating within the dairy industry. A great place to do business and a great place to socialise.

More details available: https://internationaldairyweek.com.au/