Drought and low milk prices push dairy farmers to the brink | Australia news

WWhile dairy farmer Shane Hickey calculated that his hourly wage rate was $ 2.46 last year, he caused a wave of indignation and sympathy. Consumers have promised to change their buying habits to support processed whey independently instead of the $ 1 per liter offered in larger supermarkets.

But among the other farmers, the conversation was very different. "I have received several phone calls from farmers asking me how I had earned $ 2.46," said Hickey.

"They were questioning me … One guy was losing $ 500 a day, $ 15,000 a month. Another guy just lost $ 10,000 a month. "

The Australian dairy industry was already in crisis when drought hit the main producing areas of Victoria and New South Wales in 2018. Today, farmers like Hickey say they do not hold that very well.

He reduced the number of cattle on his 200-acre property in Kyogle, in the northern New South Wales River region, with a maximum carrying capacity of 150 to 85.

This is a situation that is being repeated across the country. You can not operate a dairy farm without water – it takes 1,000 liters of water to produce a liter of milk – and there is not much to do.

This is the latest in a series of setbacks that the Australian dairy industry has been facing over the past decade. The number of dairy farms in Australia increased from 7,510 in 2010 to just 5,669.

Most of these problems date back to 2014, when the lifting of quotas for European milk producers and the sanctions against one of their biggest markets, Russia, following the fall of MH17 have created an overabundance of supply that has resulted in a slowing global economy. price of milk solids.

Milk solids are the dried powder of fats and proteins that remain once all water has been evaporated. Milk usually contains about 12% solids and milk prices are based on milk solids.

In Australia, Coles and Woolworths took advantage of this oversupply to negotiate the wholesale price of bulk milk for their own-brand products, which they had started selling for $ 1 a liter in 2011.

In April 2016, leading processors Murray Goulburn and Fonterra terminated their mid-season milk supply contracts after overestimating the global market that saw companies face deficits of up to $ 200 million. The price offered to farmers was reduced by about $ 0.80 per kilo of milk solids for Murray Goulburn and $ 0.60 for Fonterra. This reduction has been applied retrospectively, which means that payments to farmers have been reduced by almost two-thirds. . The sudden drop in cash led some farms to bankruptcy.

For decades, Australian farmers had been advising Australian farmers to invest more and produce more when bills increased, in the hope that increased efficiency would improve results. At the same time, farmers have been asked to reduce their debt to reduce their exposure.

When the drought is over, they can not do one or the other.

"The search for efficiency that we all knew was the way we were supposed to make our money because we were not going to get more for our milk, we actually increased our cost base and added more risk to our business, "dairy farmer Phil Ryan said.

Last year, a report from the Australian Consumer Commission on Farmers attributed the farm price to "power asymmetries" between supermarkets and processors, as well as processors and consumers, but indicated that she "had not obtained any evidence that supermarket prices, including 1 dollar a liter of milk has a direct impact on producer prices."

This is because farmers are getting the same price, whether it turns into $ 1 or not, with prices set by processors like Murray Goulburn.

On Monday, Woolworths announced that it would increase the retail price of its own-brand milk by 10 cents for two- and three-liter bottles, the increase being pbaded on to the producer. About 450 farmers are expected to receive a price increase, which will be less than 10 cents per liter produced.

The Minister of Agriculture, David Littleproud, had since September put forward the idea of ​​a temporary levy on farmers affected by drought. He welcomed this news by inviting Coles and the German supermarket chain Aldi to do the same.

But the government reminded the government that Prime Minister Scott Morrison had replied, "I want to make sure we can ensure the sustainability and viability of our dairy sector, but do not do it to the detriment of parents who pay money. milk on their corn flakes. "

Ryan runs a 200-cow business near Bega on the south coast of New South Wales, supplying Bega cheese. It now has a little over 50 cents a liter on the farm, which is about the cost of production. He says it is unfair to shift the cost of living burden to farmers who can not pay their own bills.

Ten cents a liter or 20 cents a liter is not going to crush most household budgets, he said. "Yes [Morrison] I really do not think that Australian families can afford it, so the problem is much bigger than the dairy industry. It is a problem to raise the minimum wage. "

Ryan worked in information technology in Sydney until 2007 and is preparing for a second job to support his operation if drought does not subside in the next 12 months. The record of mental health is high. Half of the farmers that Ryan knows admit that they have to deal with depression and anxiety. Many more bottle.

"Six of the 65 local farms have been sold in the last 12 months," he said. "I was talking to another local farmer the other day, we both say we do not know if we will survive … we have four month bills that we can not afford."

According to Michael Harvey, senior dairy badyst at Rabobank, the price of milk in Australia is expected to increase in the coming fiscal year due to the shortage of global milk markets, which will rebadure farmers affected by the drought.

The world commodity price is expected to be $ 6 per kilogram of milk solids in the medium term.

"You have to plan your business and structure it so that the price of milk is average and that, if you can make money with it, you have a sustainable future," Harvey said.

Demand for dairy products is increasing, particularly in China, but the market favors those with the lowest production costs. Some high-value products, such as infant formula, which are purchased from Australian stores and shipped directly to China through informal channels, require additional ingredients that can not be purchased in Australia, even though milk production in the domestic market increases.

Australian farmers can be competitive globally if they can rely on growing rainfed pastures rather than on grain or hay feed. Once considered normal, these conditions are becoming less frequent because of climate change.

Farms that rely on irrigation, such as those near the Murray River in northern Victoria, are less viable and many have already been listed for sale.

Joel Fitzgibbon, spokesman for the agriculture workforce, said he would ask ACCC to explore the possibility of establishing a floor price for milk so that farmers can cover their costs. Littleproud says the idea is impractical without a quota system, which would cancel deregulation of the dairy industry after two decades.

Executive Director of the Australian Dairy Farmers Advocacy Group, David Inall, met with Fitzgibbon to discuss the proposal this week. Farmers are increasingly worried that producer prices will not cover production costs and have encouraged them to "work with Dairy Australia on strategies to keep production costs low while capitalizing on the opportunities available to them. Export and other ".

Some Australian farmers advocate a return to a highly regulated quota system, similar to the Canadian model. Canadian academic Bruce Muirhead describes the current Australian system as "completely unsustainable" and relies on neoliberal agricultural philosophies about the uncapped power of investment and technology for greater efficiency.

Or, as Hickey says, "The farmers were fed a big load of shit."

"They've been told to grow, to get economies of scale, to buy all that expensive equipment to maintain … get all these expensive products in for your cows to produce more milk.

"Now that the products are gone, the hay is over the roof, all your soy meals are non-existent, so all the farmers who listened to the experts are screwed up."