MOTION: Dairy Industry initiatives

MrPURCELL (Western Victoria) — It is my pleasure to move:

That this house notes the results from the initiatives taken by the Victorian government following the 2016 dairy clawback by Murray Goulburn and Fonterra, including —

(1)   if the results of the Victorian state-funded initiatives for agriculture are working; and

(2)   whether other interstate or overseas models would help improve the viability of agriculture in Victoria.

Today I rise to speak about a matter critically important to this government and to my electorate — the dairy industry and its seemingly never-ending range of challenges. This is particularly pertinent at this time when yesterday Murray Goulburn made its announcement of a $370 million loss for the 2017 financial year. The cooperative reported its total milk intake for this year fell by 22 per cent, to 2.7 billion litres. In its report the company stated that it had had a difficult and challenging year in 2017, and I think that is certainly an understatement —

MrBarber interjected.

MrPURCELL — Absolutely. And that the company has immediately frozen all spending.

This latest revelation from one of our major dairy companies shows the dairy sector is most certainly not recovering and most definitely in a time of crisis. The motion will address the key challenges facing agriculture in Victoria, examine what the government and public and private groups are doing to offset these challenges and look at ways the state government might better support the agricultural industry in Victoria, and in particular the dairy industry.

The agricultural industry in Australia and Victoria has been reducing in size for quite a number of years. Sheep numbers have reduced by 7 million over the last 15 years and beef cattle numbers have reduced by around 200 000. Nevertheless the agricultural industry is still strong and has growth potential, and the declining numbers point in part towards a move to manufacturing high-value food products.

My electorate of Western Victoria Region has some key advantages as a site for agricultural production, including reliable rainfall; a temperate climate; access to infrastructure, including the deep sea port of Portland; and Avalon Airport. It also includes a diversity of dairy, sheep and beef, and strong industry-led research and development. A significant current issue for the dairy industry is 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 of these are complex, but I will outline what I believe to be the main three causes.

The first is the unexpected contraction in international domestic markets for milk products. Most predictions prior to the 2016 forecast on demand and prices paid for Australian milk products were that they would rise in the coming decades, and many farmers invested heavily in expanding their businesses to meet this demand. When prices dropped suddenly many farmers were left with loans that they were unable to repay.

The second cause is that Murray Goulburn, which is and was a key milk distributor, retrospectively cut the prices paid to farmers in the 2016 year. This resulted in reduced profits and for some farmers substantial financial losses, particularly those who had expanded their farms prior to the price cut.

The third cause is cuts in international wholesale prices. Milk powder is treated as an internationally traded commodity, and sharp falls in the price of the 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 to Victorian farmers. Exports present the strongest growth opportunity for Victorian farmers. Australian agriculture has a strong brand identity, which is being recognised in growing Asian export markets and which presents opportunities for farmers to make and sell more profitable premium products. Victoria has high food safety standards and is well placed to meet top international biosecurity standards. Federal funding is available for farmers to improve biodiversity surveillance and analysis, and state and federal governments are investing to improve animal tracking technology to ensure international customers retain confidence in Australia's agricultural products.

One of the big problems we have in the agricultural industry and in particular the dairy industry is the ageing of farmers. This is a substantial challenge. The average age of the Australian farmer today is 56, which is 17 years older than the average Australian. Ten years ago the average age of farmers was 54. Only 13 per cent of Victorian farmers are under 35. Many unproductive smaller farms are staffed by older farmers transitioning towards retirement, many of whom are unwilling to embrace new technology, farming methods or business models, and many of whom may not have the expertise to capitalise on new markets and business opportunities. The rising age of Victorian farmers is hampering the state's agricultural productivity.

Young farmers see a career in agriculture as unrewarding and unattractive, and young labour is often difficult to find. The Victorian state government runs a limited set of programs to help young farmers to pursue their careers, such as the Young Farmers Scholarship. These programs are tailored towards young people with pre-existing experience in the industry and do not encourage young people from either rural or metropolitan areas to actively consider a new career in agriculture. Government-run education and advocacy programs promoting careers in agriculture could help to alleviate this issue.

There are several programs and initiatives available for the Victorian agricultural sector, but not specifically for the dairy industry. The Victorian state government operates many programs that provide regulatory training and financial assistance to farmers across the state. Most new programs are funded under the government's food and fibre sector strategy, a long-term plan for the industry launched in 2016. Some examples of government funding and operating programs targeted at the agricultural industry include grants, subsidies and sponsorships, research and development support, and advocacy and advisory programs.

In 2016, in response to Murray Goulburn's reduction in the milk price, followed by Fonterra, the state government established the Dairy Industry Taskforce, made up of government, industry leaders and lobby groups. The task force 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 task force has disbanded, it does not appear to have produced any new policy outcomes since May 2016.

In my part of the world, the Great South Coast Group's food and fibre action plan aims to address most of the industry challenges identified earlier. The key to this plan is boosting productivity for smaller farms and developing a holistic plan to educate young people in the agricultural sector. The state government has promised an unspecified amount of funding to deliver the plan as part of the Regional Partnerships program. It is unclear how most elements would be delivered, particularly its targets for educational outcomes and infrastructure funding. It is painfully obvious that the industry is still suffering despite the state government's task force, established in 2016 in response to the Murray Goulburn and Fonterra crisis.

What can be done? Most of the problems discussed previously can arguably be reduced to shortfalls in skills and training or a lack of available capital. That is where I think an effort needs to be considered to make certain that we do have the skills, the training and the available capital. These are the two areas that are not particularly well covered by current state policy and would be easy to target with new policy.

Farmers working on small farms often struggle to access the capital they need to adopt new technology which would make their farms more profitable and productive. Often, however, they also lack the skills to use this technology. Moreover, many farmers lack the business and financial management skills to capitalise on new business opportunities. The state government already provides subsidies and access to some training programs — for example, the Tactics for Tight Times program — but higher subsidies and more straightforward access to these programs might help some farmers to better realise their business productivity and export potential. Some recipients of the Upskill and Invest — Young Farmers Scholarship program suggest that the program taught them how to help older colleagues to use new agricultural tools and technology to capitalise on new business opportunities.

The Great South Coast Group's food and fibre action plan identifies a lack of available capital as the key to small farmers' inability to adopt more productive farming methods. The state government's own reporting indicates that greater financial assistance to adopt new technology would help small farms increase their productivity and access new markets. Both state and federal governments only rarely offer direct subsidies to farmers to purchase productivity-enhancing equipment and technology.

Another answer may be a task force similar to the manufacturing skills and training task force formed in 2004. This was established to help address the looming shortage of Victorian manufacturing workers. It would be worthwhile for the agricultural industry to encourage young people to take up training in this sector. Alternatively, such a task force might examine how best to equip farmers with the financial advice and business skills needed to fully capitalise on new markets and opportunities.

What is happening interstate and overseas that we may learn from? There are various support packages nationally and internationally. Last year in New South Wales the government offered dairy recovery concession loans, while in South Australia the government invested in the Do Dairy campaign to educate South Australians about the range and quality of local dairy products. Just this month the Queensland government announced it would inject funds to help promote Queensland milk, while last year the Tasmanian government announced a range of additional initiatives to support the struggling sector.

In Europe last year the European Commission spent more than €500 million to support farmers, including the European Union-wide scheme to incentivise a reduction in milk production. This was less than a year after an initial €500 million package. France contributed €600 million in July 2015 to a package of urgent aid for farmers, including the annulment of €100 million in taxes, with a further €500 million to be set aside to allow farmers more time to pay taxes and other debts, €50 million in funds to help farmers reduce their debts and the public investment bank to guarantee up to €500 million in loans to the farming sector in a further attempt to alleviate the cash crisis. I am certainly not proposing that this state go to the same degree as France, but we do need to take action along the lines that I have previously mentioned. That is mainly in regard to education and training and also in regard to developing new equipment for farmers to use.

Finally, agriculture is the backbone of our country and the dairy sector is an overwhelming component of this. Unless we do something to support our struggling dairy industry we will create a world where we cannot compete in the global agricultural space and we will become more heavily reliant on imported goods. We are a unique country with what was once a flourishing agriculture and dairy sector. I urge the government to do anything and everything they can to support our dairy industry to remain competitive.