Has our dairy industry recovered?


Monday, 28 August 2017

Western District MP James Purcell presented a motion in the Legislative Council last week asking the government to report on the success of assistance schemes following the 2016 dairy industry clawback.

James Purcell MP

In his motion Mr Purcell asked whether other interstate or overseas models would help improve the viability of agriculture in Victoria.

"The announcement of a $370.8 million loss and drop in milk intake by some 22 per cent by Murray Goulburn last week indicates our dairy sector is most certainly not recovering and is most definitely in a time of crisis," says Mr Purcell.

"The dairy industry and its seemingly never-ending range of challenges is a matter critically important to this government and my electorate.

"The motion addressed the key challenges facing agriculture in Victoria, looked at what the government, public and private groups are doing to offset these challenges and looked at ways the state government might better support agricultural industries in Victoria."

In 2016, in response to Murray Goulburn’s reduction in the milk price paid to farmers, the State Government established the Dairy Industry Taskforce, made up of government, industry leaders, and lobby groups. The Taskforce resulted in funding boosts to existing financial counselling and mental health programs, with no regulatory changes or direct financial subsidies given to affected farmers.

"Changes in milk purchasing contracts have recently come as a result of the industry establishing its own, voluntary code of conduct, without government involvement. While there is no indication that this Taskforce has disbanded, it does not appear to have produced any new policy outcomes since May 2016," he said.

The 2017 budget introduced a raft of funding measures aimed at supporting farmers, including:
* About $65m total funding for biosecurity measures;
* $45m for ‘improved digital technology and infrastructure’, focusing on internet connectivity;
* $1.7m to re-establish a Rural Women’s Network, supporting the participation of women in the agriculture industry; and
* Unspecified ‘funding’ to deliver the Great South Coast Group’s ‘Food and Fibre Action Plan’

"But how are any of these securing the future of our dairy industry?" Mr Purcell asked.

Mr Purcell said a significant issue for the dairy industry was economic volatility and commodity price volatility. From 2016 onwards, the dairy industry has been faced with a series of price crises that have put farmers under great financial pressure. The causes for these are complex, but some key events include:
* Unexpected contractions in international and domestic markets for milk products. Most predictions prior to 2016 forecast the demand (and price paid) for Australian milk products to rise into the coming decade and many farmers invested heavily in expanding their businesses to meet this demand. When prices dropped suddenly, many farmers were left with loans they were unable to repay;
* Murray Goulburn, a key milk distributor, retrospectively cutting the price paid to farmers for milk in early 2016. This resulted in reduced profits and, for some farmers, substantial financial losses, particularly for those who had expanded their farms prior to the price cut;
* Cuts to international wholesale milk prices: milk powder is treated as an internationally traded ‘commodity’, and sharp falls in the price of this commodity in 2016 led to adjustments in the domestic market for milk products. Victorian farmers are also more reliant on milk powder exports than those in other parts of the country, so these adjustments were particularly damaging for Western Victorian farmers.

Mr Purcell also raised concerns about increased international competition and challenging terms of trade, the relatively low productivity and decreasing profitability for smaller farms, the influx of international investors looking to purchase large tracts of dairy farmland, and the ageing population of farmers with young people choosing not to continue on family farms. Climate change and variability also promises to have a significant effect.

"We have all heard the saying ‘built on the sheep’s back’. Agriculture is the backbone of our country and the dairy sector an overwhelming component of this.

"Unless we do something to support our struggling dairy industry we will create a world where Australia cannot compete in the global agriculture space and we are more heavily reliant than we already are on imported goods from other countries.

"We are a unique country with what was once a flourishing agriculture and dairy sector and I urge both the state and federal governments to do anything and everything they can to support our industry to remain competitive."



Mr Purcell's full motion speech is available on the website at www.jamespurcell.com.au/motion-dairy-industry-initiatives/