QDO’s submission ACCC interim report into dairy industry

Below is the summary of the QDO submission. The submission in its entirety can be viewed HERE.

The QDO strongly support the key ACCC findings that:

  • the dairy market does not work and must be fixed – it is a failed market
  • Industry structures, and price structures are inevitably different and higher in Queensland than other markets and this is not principally or significantly caused by inefficient farmers, industry structure or systems
  • the voluntary code of conduct insufficiently remedies market inefficiencies/failings and must be strengthened
  • a voluntary code insufficiently remedies market inefficiencies/failings and must be made mandatory.

However, we feel that even a strengthened and mandatory code is a weak and insufficient response to the current problems in Queensland, will not establish a functioning and efficient market, and more must be done.

The Dairy Inquiry Interim Report (the Interim Report) of the Australian Competition & Consumer Commission (ACCC) vindicates and supports what dairy farmers and Queensland Dairyfarmers’ Organisation (QDO) has said about the dairy market in Queensland:

  • The market doesn’t work – it is a failed market and must be fixed
  • Farmers have no negotiating power and prices and terms are dictated to them by processors – we say this is their easy and weak response to retailer pressure
  • Processor returns have been and continue to be massively reduced from $1/lire milk
  • Farmgate milk prices are inadequate and unsustainable
  • Merely increasing retail prices won’t fix the problem as increased profits to retailers and/or processors won’t be passed on to farmers, because the market is broken
  • Voluntary codes and other solutions have not worked and need to be strengthened and made mandatory.

There are several gaps in the Interim Report, and factual errors leading to wrong conclusions, but they don’t impair the key finding of market failure. While the Interim Report powerfully and in detail makes the case that the dairy market is a failed market, and highlights many of the problems in the industry previously identified in many other reports, it identifies insufficient solutions to solve the problem. The final report must have sufficiently broad recommendations that dairy farmers can be confident the failed market will be fixed – anything less guarantees future farm failures and guarantees continued campaigning for re-regulation.

Deregulation of the dairy industry has failed – the shallowness of the ACCC proposals in response are of enormous concern.  Those who advocate deregulation and the freeing of market forces (i.e. the Australian Government and its agencies, in this instance) have an unambiguous obligation to have a proper, effective, and thorough policy toolkit available to use to fix the problem, when deregulation fails.  The limited responses from ACCC – which will not resolve the problems of the dairy industry nor fix the market – expose an enormous gap in the readiness of Governments to fix their policy mistakes.  Sadly, that failure is killing the dairy farming sector in Queensland, but an appropriately strengthened final report from ACCC has the capacity to do much more.

The submission in its entirety can be viewed HERE.
See the ACCC interim report in the dairy industry HERE