Long-awaited strategy receives favorable reaction after it is finally released
New plan will ‘help rebuild profitability, confidence and unity’ of Australian dairy industry
It stems from one of the biggest consultation exercises ever conducted by the A$4.4bn (US$3bn) industry, which took the opinions of more than 1,500 people at 25 workshops across Australia earlier this year.
The plan follows a series of market failures in recent years that has led to deep distrust among dairy farmers towards the processors they supply, some of which unexpectedly cut farmgate prices and financially crippled many dairymen.
In 2016, following a glut in the global market, milk processing cooperative Murray Goulburn slashed the price farmers were expecting to receive and began a A$200m (US$136m) clawback on the milk it had already acquired.
Since then drought and resulting high feed costs, and irrigation water prices have led many dairy farmers to reduce their herds or get out of the industry altogether.
This reversal has led to a shortage of milk and some of the highest farmgate prices ever seen as processors scrabble to compete for the dwindling supply, down from around 10bn liters a year a few years ago to an expected 8.2bn-8.5bn liters this season.
Plan published
The draft Australian Dairy Plan, published last week, sets out a range of industry-wide initiatives that its authors hope will restore the lost confidence, lift profitability for struggling dairymen and stimulate growth.
On the back of modest growth projections, the plan will support around 1bn liters of additional national milk production annually by 2025, worth more than A$600m (US$409m) per year to dairy farmers. This additional growth aims to stimulate the creation of at least 1,000 direct new jobs, mostly in rural and regional areas.
A final version of the plan will be published in March, and will include recommendations on reform of industry structures and advocacy arrangements. Feedback will be sought for this next month.
Speaking at the launch of the draft dairy plan at a farm in the Victorian dairy region of Gippsland, its chair and former premier of the state, John Brumby, said, “It sets out a series of commitments, priorities and specific initiatives which we believe will help rebuild the profitability, confidence and unity of Australia’s dairy industry.
“The draft plan also focuses on helping farmers better manage the increased cost of key inputs like feed, water and energy to support the profitability of their dairy businesses,” he added, while being flanked by officials of dairy organizations including Dairy Australia and Australian Dairy Farmers.
The dairy industry, he said, had been weathering a “perfect storm of challenges in recent years” amid a climate of volatility.
The plan’s development had allowed the whole supply chain to regroup around a common set of priorities and objectives, while facing up to areas for improvement.
An extensive nationwide consultation exercise allowed common themes to be identified, leading the plan to feature several “commitments for transformational change.”
The first aims to “reset” how farmers and processors work together, to provide more transparency about milk prices, as well as the establishment of a “milk price monitor.”
Another sets out to ensure that all dairy farms will have completed business plans by 2025. There will be more promotion to consumers in a move that would double expenditure on marketing to improve the image of the industry and counter incursions from alternatives such as soy and almond products.
There is a commitment towards better ways to collaborate with the government on initiatives to stimulate growth, reduce costs and remove barriers.
Another measure, to be announced next month, will be a proposal to rationalize the large number of dairy industry organizations.
The milk price monitor, essentially a national price watchdog, has received the most press after it was announced. In practice, it could create a fully competitive market for the country’s dairy farmers.
Industry reaction
The plan was by and large received warmly by dairy organizations and experts, though some retained the sense of ennui that many have been carrying instinctively during the latest droughts and farm closures.
Queensland Dairyfarmers’ Organisation president Brian Tessmann, in an editorial in the North Queensland Register, said the plan was “likely to be a far cry from what the industry wants” and hit out at a perceived opaqueness in how it had been put together.
The criticism centered on recommendations by a joint transitional team that had been tasked with evaluating various options to restructure and reform the way that dairy is run in Australia.
“These recommendations are without doubt the most fundamentally important part of the dairy plan,” Tessmann wrote.
“Is it any wonder that dairy farmers have lost faith in the dairy plan? Is it any wonder that they had lost faith in our industry's organizations and their ability to do their jobs and protect, support and assist the Australian dairy industry?
“One thing that is abundantly clear is that some industry organizations have driven the dairy plan to suit their own needs and agendas rather than the needs of the farmers,” he speculated.
By contrast, other dairy groups, some of which had been involved in the process, appeared cockahoop with the plan.
“The big investment we made in industry engagement and listening has enabled us to identify common themes and agree on priority issues to help reset the future direction of dairy,” said Jeff Odgers, chair of Dairy Australia.
“The draft Dairy Plan contains initiatives we believe can make a significant impact, including a whole-of-supply-chain approach to a new national marketing and promotion campaign that can double the size and scope of our current marketing activities.”
Australian Dairy Farmers president Terry Richardson added, “The future health of this industry is something we all have a stake in. We need to get value back into the market, so that dairy products yield a decent return for all parts of the supply chain.”
