Monday, February 14, 2011

The Plight of the Dairy Farmer


Ahhh....Australia! A country that true blue Aussies love....to love! A country of opportunity. A country of a fair go. Where we wish the best for strangers. Where strangers are only too happy to help those less privileged, and desperately in need of help.

No more clearly has this been evident than in the recent devastation experienced during Queensland's floods, and now Cyclone Yasi. Proud to be a Queenslander - but it's much more than that. I'm an Aussie.

Somewhere amongst all this craziness, quite literally between the worst flood in decades and the most powerful Cyclone in living memory, some of our most powerful market forces have the audacity to be just about as un-Australian as imaginable by crippling yet another industry. Perhaps the lowest act of their strategy was to sugar coat the crashing of the milk price with deceipt and propaganda that this discounting "will not affect the Dairy Farmer".

Fact 1 - Supermarkets force Milk Processors to tender for the 'home brand' supply contract, by making shelf space for branded products available ....only if they comply.
Fact 2 - when Supermarkets lower 'home brand' prices, it is true that they can literally take losses on that line - by increasing margins on other products. This negates normal maket forces driven by supply and demand.
Fact 3 - processors (eg Parmalat, National Foods) have 2 options to maintain market share with their branded products (eg Pauls, Pura, Dairy Farmers)...
a) lower prices to compete
b) pay their suppliers (the dairy farmer) a lower % to reflect sales.
Either way, processor profits are made from the sale of branded products.
This loss of margin and or sales must be passed onto the dairy farmer for the processor to remain viable.
Fact 4 - Many dairy farms in NSW and QLD have recently or will soon face income reductions of 25% for their milk (while cost of production continues to rise sharply).

Coles and Woolworths are big businesses. They are highly motivated by profits and shareholders. This knowledge will come as no surprise to them. They are well aware that farm gate price will be cut (in many cases to below the cost of production)...just not by them directly.

The thing that astonishes me is that there is no longer the desire for the truth to be made available to the public. There is no expectation for the multi-nationals to be honest about the direct impact of their pricing actions on the future health of this great country's rural sector. The wider ramifications to the consuming public long term is an absolute loss of control over the quality of fresh produce available.

Currently Australia has amongst the most stringent quality standards globally. The farmers within our country go to great pains and expense to meet these standards, as they are not optional - and nor should they be. But once you relinquish control....well...you take what you get. We've already seen this in some areas like fruit and seafood, where imports may come from countries with much more relaxed production standards.
In the process of being forced to aquire an arguably inferior product in the future, 'our' multi-nationals have crippled another Australian industry - the Dairy Industry. Of course they will have you believe this was not their intention. The end result is truly all that matters.

So what is the end result?
1. Closure of local family operated businesses (expect to see a huge fallout of dairy farms over the next couple of years).
2. Lost employment opportunities at farm and manufacturing levels.
3. A small cost saving to the consumer (reflective of International Government subsidies, lower wages and cost of production available in other countries).

Most frustrating of all is that in our free democratic country, there is no longer any need to held accountable for our actions. The ACCC has become a toothless tiger. Millions are spent on Senate inquiries - yet Governments are seemingly only too happy to turn a blind eye to the demise of our rural sector in the name of corporate profits.

Ahhh....Australia!!