The Dairy Industry’s Mandatory Code of Conduct may be one step closer, but we need an end to $1/L milk now.

Late last week, Agriculture Minister David Littleproud announced that the federal Cabinet had endorsed the dairy industry’s Mandatory Code of Conduct.

Cabinet endorsement clears the way for the Committee to submit the draft wording for the regulations in the Code. Given the careful but laborious processes involved in the development of such a Code, Minister Littleproud and the Government are to be commended for the progress it has made to date.

There are 5 major issues that the Code of Conduct addresses and QDO supports these reforms and believes they will assist in redressing the balance of power between processors and farmers.

However, the Code does not address the urgent issue killing the Queensland dairy industry which is $1/L milk. All political parties, retailers and processors have a social responsibility to remove this cancer that has slowly killed the dairy industry not only in Queensland but in many other states including NSW.

If certain retailers with no social conscience continue to ignore the extreme and negative economic and mental health impacts of their policies, they need to be held accountable by all political parties. Or are profits of big business and bonuses for staff more important than the viability and mental health of farmers and the regional communities that depend on them?

The Code of Conduct is welcome but what the Queensland dairy industry need now is a permanent end to $1/L milk. For many dairy farmers in Queensland, and indeed, across Australia, the reforms that will come from the introduction of the Code will bring too little change. We need all parties in the value chain to take responsibility to ensure the survival of the Queensland dairy industry.

Eric Danzi. QDO Executive Officer

 

Coles’ Tweet confirms $1 per litre milk creates milk shortage for consumers.

A few days ago, I got a surprise when I opened my social media page to find I’d been tagged by irate farmers asking me what Coles’ response to NSW dairy farmer Adam Forbes’ tweet, as seen below, actually meant. While Forbes posted in late February, it seems the tweet only reached the eyes of Coles’ social media response team early last week. Farmers were certainly quicker to respond and screengrab the post for posterity.

Forbes tweet was in response to Norco’s recent in-store notifications that it is currently running short of Norco branded products.

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While it is a case of reading between the lines, the message relayed in Coles’ four seemingly harmless sentences is very clear –  the industry has reached a point that it no longer has enough milk to meet consumers demand for both  branded and private label milk supply requirements

On the face of it, Coles’ response seems to be rational and cooperative. In layman’s terms, the phrase ‘In partnership with’ implies that together, Coles and Norco put several alternate ideas on the table and came up with a mutually beneficial solution to help Norco’s current, supply shortfalls in Queensland and New South Wales.

‘We have also worked with our other partners…to source them more milk’, makes Coles seem to be exemplary corporate citizens working with its suppliers in times of need.

In effect, this tweet says that Norco should say thanks Coles for helping them out, when in fact it’s anything but the truth.

Rather than assisting the 100% farmer owned Co-Op by raising the recommended-retail-price (RRP) of private label milk which would allow for some leeway in the margins to keep farmers in the industry , Coles’ intends to source a larger volume from its other milk supplier, out of Victoria in an attempt to meet Qld & NSW consumer’s requirements for fresh milk.

Many may argue that this is just business as usual. Any company that can’t get a product from one supplier is justified in sourcing it from another. In this case however, Coles is a large part of the reason that Norco & the Qld Dairy industry finds itself in this position, short of milk.

What the market continues to ignore is that supermarkets are key players in the supply chain and have a corporate responsibility to ensure that primary industries such as dairy, can profitably survive. Woolworths have recognised their role and have done what is right for the dairy industry and ultimately for the consumer.

If Coles wants to continue to spruik its what’s best for the consumer mantra, it had better have a good explanation when the dairy industry turns sour and consumers are left without.

Mr Matthew Trace – Vice-President Queensland Dairyfarmers’ Organisation.

Norco gives its suppliers some much needed relief.

Last month QDO wrote about the long-term issues caused by Coles’ tokenistic Dairy Drought Levy stunt. Of concern, was the emotional and financial impact Coles’ convoluted payout system had on the Norco farmers who supply Coles’ private label milk.

Expecting that Coles would follow the Woolworths’ model and pay Norco the 10 cent levy to distribute, Norco farmers were dismayed when Coles announced that they would share the Levy funds to any dairy farmer regardless of what brand they supplied.

So, while we were pleased for any farmer able to receive a share in the shopper generated funding, it was never going to be more than a publicity gesture.

Many were lured into thinking that Coles was being a responsible and caring corporate citizen, but in fact, all it wanted to do (and did) was relieve the pressure and complaints from shoppers who genuinely did and still do want to help our farmers by paying a fair and equitable price for milk.

Because of Coles’ disregard and disrespect for its contracted supplier, from mid-January, Norco was unable to match the farmgate price being paid by its two major competitors. This led to some serious concerns that Australia’s remaining Dairy Co-operative may not be able to meet supply contracts, if its farmers were forced to go to another processor able to pay a higher farmgate price.

The good news released late last Friday, was that by creating some operational efficiencies, Norco have been able to increase its farmgate price to its farmers by 6.5c/L and are now on par with that being paid by Parmalat and Lion.

On top of Norco’s announcement last week was the news that the Australia dairy industry has waited for. Woolworths’ announcement that it would no longer sell fresh milk for $1/L but would increase its minimum price to $1.10 was a bold, brave move. It showed true leadership for them to stand alone and come out fighting for our farmers. Most importantly for our farmers is that the full 10 cent increase will be passed back to its suppliers via Parmalat.

This move was not about increasing profit. It was not about publicity. It was the Woolworths’ Board, CEO, COO and CFO unanimously agreeing that having a floor price on milk, or any other basic commodity for that matter, was unsustainable and ultimately, not in the best interests of the consumer.

Time and again, we see weather events causing short term scarcity in some of our favourite produce. Due to the 1 in 500-year weather event in the Townsville region, livestock and crops were flooded and lost. As a result, shoppers are feeling a significant pinch at the checkout or having to go without.

Coles constantly proclaims its strategic direction is always based on what’s good for the customer. We must ask; how can a discounting policy that is leading to permanent scarcity in supply caused by farm closures possibly be good for the consumer? Already the Queensland dairy industry is unable to meet our state’s fresh milk needs due to farms going out of business.

Unstable and unprofitable farmgate pricing and predatory pricing practices from supermarkets like Coles squeezes the profitability at all points in the value chain to the point of unsustainability. If Coles continues to ignore the needs of the dairy industry, they will face the wrath of shoppers forced to buy inferior and / or imported dairy.

As a Norco supplier myself, I am torn between the company whose private label contains the bulk of my milk or supporting a company that ultimately has the true and best interests of the dairy industry at heart. That’s why now, I pick Woolies.

Mr Matthew Trace – Vice-President Queensland Dairyfarmers’ Organisation.

Dear Coles....

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While many dairy farmers are frustrated and talking a lot about their issues with the grain prices due to the drought, it is good for us to get individual stories that go to the heart of the matter. This letter to Coles from the Darling Downs from Donna and Mark Fitch outlines the true costs to farms.

Thank you for your drought relief funds- however I would like to make a point that the Consumers are actually the ones receiving Charity - from the pockets of the Dairy Farmers who are trying to make ends meet-and in many cases are unable to.

We have milked for three generations- have invested into our business to meet market demands- our herd numbers and workload has doubled to ensure that we are able to remain viable in the face of an industry that is capped by the $1 litre milk.  We supply two million litres to Norco on the Darling Downs. 

As stated, we received $6200 from the Drought Relief fund, however we calculated that the added feed cost alone per month is $17 500 extra over that of a normal season.  With those figures, the 4 Million Dollars that Coles collected would support approximately 20 farms to break even for 12 months. Feed on the Darling Downs is becoming difficult to source with any reliability. Our summer silage is now looking like a complete failure, having been cooked off in the recent heatwave.

To add insult to the situation, we spent $50 000 in November on a new bore as our bores are running dry with stock water pumps running 24 hours to keep supply to our herd. This bore has now failed, and we have been forced to drill another bore totalling $90 000.

Given this information we are obviously looking to stop the business from haemorrhaging, having maintained a steady growth of production over the years and maintain supply to our consumers.

In summary, our only option will be to cease supply within the next 6 months if we cannot get the market to carry some of the burden of the cost of production. 

I ask that you please consider increasing the price of milk to the consumer to allow the money to return to the farmers who are desperately trying to survive this crippling drought.  I would welcome a visit to our property to discuss our request further.

Regards,

Donna and Mark Fitch - QDO Members

Shoppers are urged to support Woolies as they start the end of $1/L milk.

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It is a day filled with joy in the dairy industry today as Woolworths ends the $1/L price war on milk. This is a war that has crippled the dairy industry for over 8 years.

This is a great move by Woolworths that Queensland Dairyfarmers Organisation (QDO) and all dairy farmers strongly support. QDO is delighted that Woolworths has shown such leadership today. This signifies understanding, empathy and a social conscious that is so dearly lacking in other major companies. It will make a massive difference to the dairy farmers who supply Woolworths milk across Australia.

Particularly in the face of Coles’ blatant disrespect for the dairy industry in its refusal to increase its price, QDO asks all consumers to support Woolworths by shopping at Woolworths. Customers can be confident that any milk they buy in a Woolworths store will help dairy farmers. Woolworths deserves to be supported by all consumers for the great leadership they have shown on this crucial issue for dairy farmers.

Customers can be extremely confident that if the buy Woolworths branded milk that 10c/L will go back to farmers. Woolworths has a track record of ensuring every cent collected goes back to farmers after the highly successful and transparent drought levy that Woolworths have applied in Queensland and NSW for the past 5 months.

Finally, QDO pleads for all other retailers to follow the leadership shown by Woolworths and apply an additional 10c to all retailer branded milk with all proceeds to go directly back to farmers. If you walk into a shop and they still sell milk for $1/L, turn around and leave the shop and go to retailer than supports dairy farmers like Woolworths.

Today is a great day for all dairy farmers. Thank you to Woolworths for the understanding, empathy, social conscious and most importantly leadership you have demonstrated today. All dairy farmers say thank you.

QDO welcomes new Natural Resource Manager.

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In light of the major environmental disaster and public outcry over the Murray-Darling Basin, water quality and our responsibility to ensure healthy waterways is more important than ever. Farming practices have been widely blamed for much of the damage. Ongoing management, trialling new methods and providing advice and assistance to our industry members must be the responsibility of industry bodies like QDO, particularly when key heritage listed sites like the Great Barrier Reef are at stake.

 Last week, Tony Mills started in the role of Natural Resources Manager at QDO. Tony takes over the role and brings with him extensive knowledge and practical experience in Agriculture and Agribusiness. Starting in the Burnett-Mary region Tony will conclude the final phase of the 3-year Reef Alliance Project to reduce the sediment and nutrient load entering the Great Barrier Reef.

 Tony has worked with some of Northern Australia’s larger beef and sheep producers while being based in Quilpie and Charleville. He has also worked with producers across key agricultural areas in South-West Queensland, Mackay and the Coalfields, Northern Slopes and Plains of NSW and the Falkland Islands aiding them to deal with issues related to marketing, production and finance.

 While new to dairy, Tony has spent 30 years working in the agricultural sector working with businesses to realise their development and investment strategies. With a thorough understanding of a range of agribusinesses, the keys to profitability and sustainability and the challenges they may face, Tony is expected to make a significant impact on our members farms.

 In his role, Tony will work alongside farmers to implement a suite of on-farm services, which may include farm consultancy services, all aspects of farm finance and investment, recovery and resilience, nutrition services, agronomy services, such as Soil & Nutrient Management Planning, grazing management assistance and financial incentives for water quality risk management.

 Brian Tessmann – QDO President.

The drought is not over. QDO calls to renew Coles boycott. 

Drought conditions on the Darling Downs

Drought conditions on the Darling Downs

Throughout 2018, shoppers petitioned the supermarkets to assist dairy farmers in drought by supporting the 10c/l Drought Levy. Woolworth’s already raising over $4.5million to date. While we do not reject the $4 million raised by Coles, everything Coles has said and done in response to the 10c/l Drought Levy has been opportunistic and tokenistic to say the very least.

Case in point:

  1. Coles waited until Woolworths announced its Drought Relief Milk range before it offered support;

  2. Coles put the Drought Levy on a single line, that is, their 3 L Coles brand;

  3. Coles refused to distribute the Levy back via Norco who supply their private label milk; instead of making it a convoluted and frustrating process for farmers;

  4. Coles held on to the funds (and any interest) raised between September and December 31 and only distributed in mid-January whereas Woolworths were giving the funds raised back to their Parmalat farmers monthly via their milk cheques;

  5. Farmers were forced to apply - read beg - for a slice of the funds, resulting in meagre $6,219 per farm being given to anyone that applied; and the final blow,

  6. Coles stopped its Dairy Drought Levy on 31 December whereas Woolworths have extended their commitment to the Drought Levy until at least June 30 this year – acknowledging that the drought is far from over.

Prior to the Drought Levy campaign, the three major processors operating in Queensland and NSW were paying farmers roughly the same base price. Now there is a significant discrepancy, particularly the price being paid to Norco farmers who supply for Coles private label which currently sits 6.5c/l below Parmalat and Lion.

Put bluntly, unless there is a price rise of at least 5c/L in the very near future many Norco farmers will stop dairying and given the seeming instability of the co-op, Norco will find it hard to replace those farms that leave.

If Coles doesn’t reinstate the Drought Levy and pay it to Norco farmers; they simply will not be able secure enough milk to fulfil contracts.

With the Murray Goulburn debacle, floods, cyclones and the ongoing drought, our industry has suffered enough without losing our remaining iconic Dairy Cooperative.

It is time once again to call on the Australian public to make a stand against the tyranny of Coles and yet again, boycott the supermarket giant until they reintroduce the Dairy Drought Levy and give the funds raised to the farmers who are supplying them through Norco.

94% of responders to our social media poll want a return of the boycott of Coles. It is Australian shoppers want to support us. We need to utilise their power to create lasting change.

The supermarkets’ response to drought are chalk and cheese.

No wonder everyone is confused about who is helping our drought-stricken farmers.

Just before the end of 2018, Woolworths’ announced that it would continue to run with its Drought Relief range until June 30, 2019. On the other hand, Coles has made no extension to the levy which closed on 31 December.

Given that we are still heavily in drought this demonstrates just how much value Coles has for our dairy farmers.

To date, Woolworth’s has paid out $4.5 million to 286 dairy farmers across Queensland, NSW and northern Victoria via Parmalat. As the supplier of Woolworth’s private label milk, payments via Parmalat was the fastest, most reliable channel to get every cent raised back to the farm gate. The amount given to each farm is being calculated based on volume.

Woolworths has been paying the levy to farmers monthly since they began in October. Coles only advised successful recipients last week which means that the money collected from customers has been sitting within Coles’ coffers for a spell, gaining a good wad of interest.

The $3,974,292.30 collected by Coles is to be divided between the 639 farmers that applied for the fund. That equates to $6,219.5 per farm. With the price of Lucerne hay being over $800 incl GST, the amount paid out by Coles to each farmer equates to around 7 tonnes – a pittance given the amount of feed a herd goes through.

While it is great that non-Norco farmers applied and received funding from Coles, it was an illogical way to administer the fund and for many it’s a case of too little too late.

While hard to do a clean comparison, there is little doubt that Coles treated the Drought Levy as a stunt. Due to public and media pressure, they had to capitulate but did so reluctantly and as minimally as possible.

Shoppers truly want to support our farmers and are happy to pay more for their milk to do so and are not affected by a 10-cent price rise. It is certainly time for change.

Mr Matthew Trace – Vice-President Queensland Dairyfarmers’ Organisation.

Australian Day celebrations marred by the anniversary of $1 litre milk.

On January 26 2011, dairy farmers across Australia woke to news that changed the face of the industry.

In truly un-Australian fashion, the then Coles' director of merchandise, John Durkan and CEO Ian McLeod felt $1 a litre private label milk had a nice ring to it and decided to announce milk price cuts - on Australia Day.

Under the pretence that the price cut helped the average Australian shopper, the strategy was in truth, designed to take market share from Woolworths and the up-and-coming new kids on the block, Aldi.

At the time, Coles were warned of the potential consequences to the dairy industry but insisted that keeping prices down for customers was more important. At the time they also argued that farmgate prices and price paid to processors were fair.

Fast forward to 2016 - the virtual collapse of Murray Goulburn due to mismanagement and the increased milk production in the EU, meant that the price paid back to farmers at the farmgate was significantly slashed.

And now here we are 2019 and our industry is still in crisis.

Australia Day should be cause for celebration. It is a timely reminder of the importance of mateship, fairness and the necessity to be as one in times of trouble.

We live in a land of highs and lows; of drought and flood. It has always been our perseverance and strength of character that has seen us through. Despite everything, most of us wouldn't want to live anywhere else.

We have seen the Australia spirit shine with the amount of public donations, business and community support right across the country to our farmers doing it tough in these drought conditions.

Even though the new head of Coles, Mr Steven Cain is another import from the UK, we ask that he embrace the Australian ethos and put an end to $1 litre milk.

Mr Brian Tessmann – President Queensland Dairyfarmers’ Organisation.

Call for a united dairy industry.

In spite of the traditional State of Origin rivalry between Queensland and New South Wales, dairy farmers from both states have a strong bond. 

There are so many similarities in climate, pastures, temperature and biosecurity issues that it’s important to keep an eye on the situation for our southern counterparts.

Shane Hickey of You Tube fame and ironically, the face of QDO’s 10cent/litre Drought Levy campaign, lives in Kyogle – 32km from the Queensland border.

Shane is a regular (and welcome) correspondent with QDO and recently caught up with us to give us the gossip from down south.

Sadly, the predictions are not good. Without rain, up to half dozen farmers from northern NSW will leave the industry by April.

Given the latest Dairy Australia production and QDAS profitability figures released late last year this is disturbing but unsurprising to hear.

On our side of the border dairy farmers are struggling to survive the drought conditions, with many dairy regions seeing a tantalising glimpse of rain but without the windfall. 

Late in 2018, QDO said goodbye to several farmers, many located on the Darling Downs which has been badly hit by the ongoing drought.

Regardless of what state or region farms are located, our industry is in crisis. 

So it’s even more important than ever that we approach the value chain issues on a national scale.

The meeting of state dairy representatives chaired by the Australian Dairyfarmers Federation late last year was a significant step towards developing a unified national front. 

Having key politicians like Federal Agricultural Minister David Littleproud, Deputy Prime Minister Michael McCormac, LNP’s Shadow Minister for Agriculture Tony Perrett and MP Llew O’Brien publicly support a call for a Royal Commission into the predatory pricing of supermarkets gives a glimmer of hope that change may be possible.

Matthew Trace – Vice President

2019 another year of challenges for dairy industry.

2019 shapes up as another challenging year for dairy farmers and the dairy industry. As has been the case for the past eight years, retail pricing and the impact on dairy farmer and processor incomes is still by far the biggest challenge to overcome. Other key issues include the Australian dairy industry plan and biosecurity.
After many years of no change re retail milk prices, finally in 2018 some movement occurred largely as a result of a concerted campaign by QDO. This has led to an increase in prices received by Queensland dairy farmers. For some this increase was very short lived while for others it will lead to an increase in price of around 5 cents a litre for almost a year. 

The challenge in 2019 is to turn these temporary increases into a permanent long-term solution. This needs to occur for all dairy products, across all of Australia and lead to more sustainable prices for both dairy farmers and processors. For this outcome to be achieved we need to have a united industry and run a concerted campaign across Australia.

The dairy industry will develop a plan for the entire Australian dairy industry in 2019. It is very important that this process leads to a small number of clear priorities to help farmers significantly increase profits and manage risk. In addition, there needs to targets set, clear plans to achieve targets and responsibility with resources given to organisations best able to achieve these targets. We need to ensure that significant outcomes for farmers are achieved given the significant investment made by farmers in industry organisations.

In the first half of 2019, QDO will undertake free Johnes disease testing for QDO members. This needs to be undertaken by June 2019. It follows the considerable effort made by QDO, with the assistance of the Department of Agriculture and Fisheries, in providing education workshops on Johnes disease and helping farmers develop farm biosecurity plans

Eric Danzi - Executive Officer

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New procurement commitment to Go Local a huge opportunity for the dairy industry.

On the 19 December, Minister Mick De Brenni announced the Queensland Government’s commitment to using local food and beverages at all Queensland Government facilities and sponsored or run events whenever possible. This means every effort must be made to have products in, for example, Queensland public hospitals, to be local.

As part of the Procurement Advisory Board, QDO had the opportunity to help develop the parameters around what constitutes local. According to the newly released guidelines, for dairy products, local means that a minimum of 85% of raw (fresh milk) product must be from Queensland and that 100% must be processed and manufactured in Queensland.

For the dairy industry, in particular, for the small and independent processors, this is a huge opportunity for growth. It may allow them to break into new markets and to consider alternate value-add product lines.

For some larger processors who are currently making many products like flavoured milk, cheese and yoghurts interstate, this policy may make them reconsider their current production arrangements.

Not only does it give our processors the opportunity to increase their volume sales, but also a chance to employ more people and potentially pick up additional farms currently supplying to one of the big three.

The procurement policy will cover everything from boardroom lunches, to banquets for visiting dignitaries, to sporting events and the arts. This is also a terrific way for our brands to gain exposure and be promoted to visitors to our state.

Sensibly, the Government is intending to take a softly-softly approach to the launch of this initiative, as there will be teething problems as caterers, restaurants and facilities operators come to grips with how to access local produce.

The government is cautious about making it difficult for the small-scale caterers to procure Queensland product when they more than likely purchase from supermarkets where, with the exception of milk, there is a glaring lack of locally produced dairy.

Contracts on sponsorships of stadiums and other major government-owned facilities will need to finish before the policy can be implemented in these places and these things will take time.

QDO has already begun the process of working with small processors so that they can take advantage of this opportunity. The independent dairy processor summit in late November was the first chance to discuss how they could potentially ramp up production and get their product into stores and locations across Queensland. Quality and quantity are key if we as an industry intend to differentiate our dairy products from other states.

Certainly, this announcement brings a level of optimism that hasn’t been seen in the Queensland dairy industry for a number of years, so we intend to take full advantage of it and ensure that our processors are in a position to meet demand with great Queensland products.

Queensland Dairyfarmers' Organisation Vice President: Matthew Trace.

Farm margins severely cut.

The release of the report from the Queensland Dairy Accounting Scheme (QDAS) for the 2017-18 year showed a significant drop in profitability for Queensland dairy farms.

 The average Dairy Operating Profit (DOP) per cow reduced from $758 in 2016-17 to $400 this year.  Drought, lack of home-grown forage and high prices for all concentrates increased the feed related costs by 3 cents per litre.

 The current high grain prices haven’t shown through yet and estimates by Departmental staff indicate extra feed costs of around 3 cents per litre for the 2018-19 year.

The Top 25% of QDAS farms achieved a DOP of $928 per cow and the remaining 75% was $149.  The main difference and drivers for this extra margin are in 4 main areas - bigger herds, higher production per cow, lower feed costs and better labour use efficiency. Milk price and investment per cow do not have strong correlation to farm profitability.

The Queensland dairy industry has used $1,000 DOP as a fully sustainable figure which allows appropriate business reinvestment. A group of 32 long term QDAS farms were benchmarked over the last 5 years and the average DOP was $602.

These farms averaged 248 cows and 6,100 litre per cow. The performance of these farms would indicate a higher margin than the average Qld dairy and yet these same farms need between 6-7 cents per litre margin to achieve the $1,000 DOP. This more than anything else highlights the challenges for all dairy farmers operating in a dysfunctional market. 

QDAS has operated since 1976 and currently is supplied with figures from 50 of the 390 Qld dairies. As a comparison, the Victorian Dairy Farm Monitor Project (DFMP) had 75 farms contributing data out of a total of 3, 880.

All of this data then contributes to DairyBase for national benchmarking.

QDO Board member: Ross McInnes

2018 – a year in review for the dairy industry.

It has been a year of highs and lows and a few frustrations for the dairy industry.

There was some optimism at the start of 2018, as the Australian dairy industry waited for the final ACCC report into the value chain. While not a complete surprise, it was disappointing that there was little difference between the Interim Report released in 2017 and the Final Report of April 2018. The only major difference between the two was the ACCC’s insistence on a Mandatory Code of Conduct between farmers and processors.

QDO and farmers are certainly disappointed that even after the first round of consultations held in November, the retailers been ‘let off’ their responsibilities to the dairy supply chain with the ACCC insisting that the voluntary Grocery Code of Conduct was enough.

Interestingly last week, the NSW Parliament released its own report into their state dairy industry. It was no surprise to QDO, nor to any dairy farmer experiencing current conditions that the findings state “The Australian Competition and Consumer Commission found that this practice does not directly impact the price paid to dairy farmers for their milk supply. This committee has found, based on the evidence before it, what is intuitive to even the casual observer and abundantly clear to farmers themselves: that retailers selling milk for $1 per litre has removed considerable value from the dairy value chain.”

With the rising costs of feed caused by drought and unsustainable farm gate prices, QDO felt that something more had to be done to provide immediate relief to our farmers.

In recent years we have come to appreciate that political advocacy can only change things so far. The decision was made for QDO to push for 10 cent/litre Drought Levy imposed for all fresh milk in supermarkets and it caused a significant stir.

The campaign received significant media and consumer support and it was with a degree of optimism that we pushed forward. Unfortunately, the might of Coles’ and Woolworths’ proved too great as they used their considerable influence to bury the campaign by promoting what was little more than PR stunts by placing the levy on single size and private label brands only. 

When some rainfall events occurred in the south east of the state, consumer and media support unfortunately waned, even though the rain did little to alleviate the conditions.

Ministerial calls for a Royal Commission into the predatory pricing of supermarkets have been a welcome renewal of interest in our industry. As one, we see that the Commission needs to investigate this issue for all perishable goods since bullying by the supermarket giants is well known by many agricultural industries.

As we enter the final weeks of the year, national and state dairy bodies have come together to work on a national campaign and we would hope that in the early months of 2019, we can work at a national level with ADF and the NFF to force the Federal Government to approve the Commission.

QDO would like to thank everyone who through kind words, sharing stories or buying Queensland brands, has supported our dairy industry through a tough 2018. Here’s looking forward to 2019 with optimism.

Queensland Dairyfarmers' Organisation President: Brian Tessmann

Annual general meeting held for Australian Dairyfarmers Federation and Dairy Australia.

The last week in November this year saw two of our national dairy bodies each conduct their Annual General Meetings in Melbourne. The first of these on Thursday the 29th was the Australian Dairy Farmers which is the QDO’s national affiliated advocacy body. This meeting included the election of one board director which occurs in rotation each year. This year National President Terry Richardson was challenged by Victorian Dairy farmer Darryl Hoey. Mr Richardson was re-elected for three years with a comfortable margin and went on to again be elected by the board and delegates as National President for the next 12 months.

Friday Morning saw the Australian Dairy Industry Council (ADIC) Industry breakfast happen at Flemington Racecourse where speakers including Earl Ratray focused on the future. A key point made by Earl and others was that while China is putting considerable effort into growing milk production their demand for milk is growing three times faster than production. Troublingly though, Australia is now a significant importer of dairy products including cheese and milk powder in a dramatic change from being a sizeable exporter. This was because of Australia’s falling milk production and lack of product for export. This was causing even high value overseas customers to consider Australia may be an unreliable supplier and was leading them to look to others including the EU.

Later on Friday the 30th Dairy Australia held its AGM which saw the election of some new directors including David Lord the past CEO of Warrnambool Cheese and Butter who is well known in Queensland from his previous time as Parmalat CEO. There were certainly many questions both off the floor and on notice asked of Chairman Geoff Odgers and new CEO David Nation. A key theme in these was where DA was focused in regard reducing Australia’s cost of production and improving farmers profitability while increasing market opportunities. There will be considerable focus over the coming year on how David, Geoff and the DA board address those issues.        

Queensland Dairyfarmers' Organisation President: Brian Tessmann

Outtakes from the Mandatory Code of Conduct consultations.

Three consultations on the Mandatory Code of Conduct for the Dairy Industry were held in Boonah, Gympie and Malanda over the last 2 weeks. Facilitated by Jo Grainger, Assistant Secretary for the Department of Agriculture and Water Resources, the consultations were open and transparent, and it was felt that the Department genuinely wanted to know what the industry believed should and shouldn’t be included in the Code.

The first question that was asked at each consultation was ‘What are we trying to achieve with a Mandatory Code for the dairy industry?’ It wasn’t a question that was expected or that has been asked before. The answer was simple – fairness for all players across the supply chain. Unfortunately, it is clear that the Code will not cover the conduct of retailers as they are theoretically covered by the voluntary Grocery Code of Conduct.

What Queenslanders call Step downs were perhaps the major concern and were a key talking point. Certainly, there needs to be a provision to allow alterations to the pricing in the major processors long term contracts to allow for clear market changes.

If such a step down (price reduction) is required due to market forces, then there needs to be a threshold where suppliers have the option to leave. We believe that a 5% drop on the contracted price should be the threshold for farmers to match or leave without penalty. 

Clearly the current practice of multiple-year lock in contracts with a processor when the contracted price is only set for 12-months cries out for an agreed mechanism for setting future price whether up or down. Also having bonuses and penalties means that there is constant uncertainty and using loyalty payments (and penalties should you leave) to lock in suppliers is something that the Code needs to address.

Currently, the loyalty payments are not a reward for loyalty, but are part of the non-contract base price. There is no intention of trying to make loyalty bonuses illegal, but we should call a spade a spade and call them supply contract bonuses.

Resolving these key points would be a major win for suppliers.

Another key area for discussion was the process of dispute resolution; specifically, who would be responsible for and fund mediation. For the large processors, it would be expected that they would employ an officer to handle disputes. But independent and smaller processors were unlikely to afford a full-time staff member. It was suggested that as a way of encouraging supply to smaller processors, that those processing somewhere between ½ to 1 million should be exempt.

Overall, this first round has been handled extremely professionally by the Department and QDO hopes that this transparency and true consultation continues.

Queensland Dairyfarmers' Organisation Vice President: Matthew Trace.

All types of dairy at processor summit.

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Queensland Dairyfarmers’ Organisation with the assistance of the Queensland Government Office of Small Business, held the first summit of independent dairy processors at Portside in Brisbane on Tuesday last week.

While traditionally, QDO has represented only dairy cattle farmers, the invitation to attend the summit and mentoring workshop was extended to farmers of buffalo, goat, sheep and camel dairy farmers.

The issues that face our traditional membership base including fodder prices, freight, irrigation, biosecurity and animal welfare are also faced by these farmers. Currently there are less than a dozen farmers specialising in non-dairy cattle farming and processing in Queensland, so it made sense to extend the invitation so that they too can benefit from the assistance that QDO offers its members.

Most of these farmers, including the Thompsons from Maleny Buffalo, are former bovine dairy farmers who, at the time of deregulation, decided to look at alternative herds in order to remain profitable and to continue farming. While the market for these products is quite young in Queensland, the appetite for alternative artisan cheeses, milk and yoghurts is growing.

Peter Gross from Black Pearl Epicure, Wendy Downes from The Cheeseboard, Dr Jonathon Staggs from the University of Queensland led the morning session with the discussion largely around the importance of developing and marketing Queensland cheeses and other value add dairy products and building a strong national reputation for quality.

The afternoon’s session had Office of Small Business, Mentoring for Growth mentors Darren Walsh and Joe Barnewall provide strategic advice on business development and expansion. It was interesting but not surprising to hear that the same key issues including maintaining supply of product, finding appropriate staff, the cost of compliance and frustrations around finance were raised by most attendees. 

Feedback from attendees has been overwhelmingly positive. There were some pivotal introductions made and a commitment from the Office of Small Business of ongoing assistance to processors. A huge thank you to all the speakers and mentors and to the processors who took a day out of their busy schedules to attend the workshop and summit.

Queensland Dairyfarmers' Organisation Marketing Manager, Sarah Ferguson

Update from up North.

Our focus for the last few months has been on our drought declared regions, but we always need to pay attention to the situation for our members in the North.

The Atherton Tablelands are experiencing an extended extremely dry period. Good rain was received across the region until the first week of July, but since then there has been little rain to report. A lack of consistent rainfall fails our free draining soils which are usually so good for our industry.

Pasture has been extremely short and good quality hay has been very hard to source and much dearer than normal. Grain prices have risen by up to 20% due to higher input prices for the grain millers. Until new season crops come in, and assuming the weather allows large scale planting of those crops, the Far North’s situation is likely to last for at least 12 months.  Water for irrigation is lessening as stream flow decreases putting further pressure on those farmers wit access to irrigation.  Milk production volumes are dropping and costs are increasing which is putting increasing pressure on farmers and the business community from a financial and mental strength point of view.

While not drought declared the situation for the far north is far from secure.

Lion, the processor that owns the Malanda factory, has put its entire dairy and juice business up for sale. The successful purchaser is unlikely to be known for about 6 months. Lion have been proactive in advising farmers of the process that they are going through and the progress so far. DFMC, the supply co-operative that aggregates the milk from farmers for the Lion factories, has a Milk Supply Agreement with Lion that will guarantee right of supply until June 2022.  Milk from our farmers will be required regardless of the sale outcome.

The Federal Government is moving to implement a Mandatory Code of Conduct for the dairy industry. This Code must cover from farm to processor to retailer.  The retailers are saying they already must abide by the Grocery Code of Conduct—obviously, from their behaviour, the Grocery Code is not enough to ensure good behaviour. So while we represent only a small number of farmers, we are pleased that we will be able to have our voice at a consultation meeting scheduled to be held on Monday 26 November in Malanda. 

Queensland Dairyfarmers' Organisation

District Councillor for Far North Queensland James Geraghty

Mandatory codes of conduct need to include supermarkets.

Between the Drought Levy, Mandatory Code and calls for a Royal Commission, there is certainly a lot of noise in the dairy industry at the moment.

Details of when and where the consultations regarding the Mandatory Code of Conduct for the dairy industry went out last week with the final meetings to be held at the end of November.

While we wholeheartedly welcome the ACCC’s call for a mandatory code of conduct, having that code simply be between farmers and processors fails to address a key part of the problem.

 Through recent discussions with state and federal politicians, processors and dairy farmers its clear to all that we need to extend the mandatory code to cover the relationship between processors and retailers; in particular the relationship with major supermarkets.

 The call for a Royal Commission into Supermarkets is because the issues we have been talking about are not confined to the dairy industry, but extend to all perishable products including all meat, fruit and vegetables.

In recent weeks, we’ve seen reports of the tough times faced by the pork industry due to feed prices. At the end of the day the bulk of meat, fruit and vegetable sales in the domestic market are through the supermarkets which this gives the major players like Coles and Woolworths the power in any negotiations regarding pricing.

Currently supermarkets are under the Food and Grocery Code of Conduct which is voluntary not mandatory. It is hard to believe that the dairy industry is alone in taking the supermarkets to task with regards to their role.

The slow wheels of bureaucracy mean that we are unlikely to get the Royal Commission into the supermarkets passed before the new year.

QDO would like to encourage all those industry bodies that represent other agricultural and horticultural industries like National Farmers Federation to contact our Federal politicians and tell their accounts of the bullying practices of the supermarkets.

A concerted whole of agriculture approach will ensure that the Commission happens. In the meantime the mandatory code as proposed in its current format can provide some, but not all the solutions to our industry’s woes.

Queensland Dairyfarmers' Organisation

QDO President Brian Tessman.

If the supermarkets won’t help, we need the Government to implement a drought levy.

In modern society, we all suffer from information overload. According to IBM, 2.5 quintillion bytes of data are produced every day. So we can forgive the average person for their seemingly short attention span.

It is hard for people living in the currently grey and rainy coastal regions of Queensland and New South Wales to believe that we are still in drought. Meteorological drought is rarely broken in a single event or month; typically regular rainfall over a period of several months is required to remove rainfall deficiencies of the magnitude of those currently in place.

But the politicians who supported drought relief efforts 2 months ago, need to take concrete action, not just sympathise.

Unfortunately for our farmers, the cost of feed and freight and general production costs are still too high and will stay that way for months. It is not as if the small amount of rain has solved our problems, if anything, it has masked the magnitude of the issues we face.

It was 8 weeks ago that QDO called for the supermarkets to raise the 10 cent/litre drought levy. This was not a marketing stunt, though Coles and Woolworths have certainly made it into one. This levy was a very real plea to the supermarkets and to the Australian public to help those dairy farmers affected by the drought.

In every media statement put out by Coles since we called for the levy, the supermarket has quoted that it is already doing its bit with its $12 million Drought Relief program. According to the National Farmers Federation, Australia has 85,681 farms. While some farms are not in drought declared areas, I would hazard a guess that at a minimum 25% of all farms are being affected by the drought due to the costs of feed and irrigation.

Taking that number and divvying up the Coles fund, each drought affected farm would receive $560 – an embarrassingly small amount and a tokenistic gesture.

Recent calls for a Royal Commission into the predatory practices of the supermarket are welcome and we ask that this is pushed through. But we have to ask how many farms will go under by the time a Commission is done?

While QDO never wanted an official “levy” imposed by the Federal Government, the situation is now at a point where Minister Littleproud needs to consider it seriously.

Queensland Dairyfarmers' Organisation

QDO Vice President Matthew Trace