OPINION: The numbers aren't good, but there is a way forward for dairy farmers

The cries for help from south south-west dairy farmers are getting louder. Warrnambool dairy consultant MIKE HAMBLIN says that in times of crisis farmers need to stick together.

Mike Hamblin says the dairy industry is in need of urgent government policy changes.

Mike Hamblin says the dairy industry is in need of urgent government policy changes.

Until the crisis meeting that occurred at Noorat on January 14 organised by "Farmer Power", which attracted about 600 concerned dairy people, this had largely fallen on deaf ears.

The problem is simple; our cost of production exceeds our income.

But, of course, the solution is incredibly complex as the majority of our product is exported and therefore subject to the world price, the world economy and other factors outside our control, such as the Australian dollar and the weather.

At a financial briefing for federal member for Wannon Dan Tehan, held in Warrnambool last November, it was suggested that up to 20 per cent of south-west Victorian dairy farmers may be in serious financial trouble and many of these may be forced to leave the industry as a result of the current price downturn.

This would have a dramatic effect on our local dairy industry and regional economy.

A high proportion of these farms will likely be younger farmers who have recently bought their farms, farmers who have recently expanded and farms supporting children at boarding school or university.

Most of the more established farms with a lower debt structure are likely to be able to survive.

Liam Ryan (The Standard, 19/1/2013) correctly points out that the milk price has been lower in the past and may even be lower in the future (heaven help us) and that the same fluctuation applies to input costs, but what is different this time is that farm debt per cow has risen from about $2000-$3000 a cow from 1998, to the drought year of 2006 when it rose to about $4000 a cow, and then post-global financial crisis when it rose to $6000-$7000 a cow before declining slightly to about $5000 a cow by 2010/11 (sources: Dairy Industry Farm Monitor Project and client data).

Land values have fallen significantly from the highs of 2007-2010 after the massive increases seen from 2006-2008 associated with the managed investment schemes, the migration of New Zealand dairy farmers to the region and superannuation fund investment into dairying.

The net result of these two factors is that equity on south-west dairy farms has declined at a time when low milk price, together with continued dry spring conditions and increased grain prices (a result of the USA drought), have meant that many farmers seeking additional funding to get through the current year are finding themselves outside banks' lending ratios, with the result that they are being told "no more money".

This means they are slow or unable to pay their suppliers, which in turn, puts these businesses in jeopardy.

Clearly, immediate financial assistance must be made available to save farmers at risk of bank foreclosure and "Farmer Power" has stated this as its first priority.

This could come in the form of interest-free or heavily subsidised short-term loans while longer term solutions are found and market forces become more favourable.

It is likely that the only speedy avenue to Joe Ludwig, Wayne Swan and Julia Gillard will be to use the existing networks provided by existing industry bodies such as the United Dairy Farmers of Victoria (UDV).

The UDV has indicated it is prepared to work fully with Farmer Power and I join Liam Ryan's call that "this is not a time to divide further but to unite together to strive for a common goal".

Together, dairy farmers will be able to achieve a lot, but divided they will be easily quashed as the effort required to sustain the push for improvement will be impossible to maintain as the cows will be waiting at home.

It is not time to apportion blame to our own representatives that give their time for the good of the industry on a voluntary basis.

As an industry we have only ourselves to blame for not bringing the plight of the industry before our own lobby group.

Going forward, we clearly need to move into the 21st century and engage our grass roots farmers much more effectively using new technologies such as email and Facebook rather than relying on numerous, poorly attended meetings.

There are many other issues that need to be addressed once short-term funding is achieved, such as the pricing structures of milk processors that are moving farmers to less profitable production systems and supermarket dominance that is harming agriculture with its use of loss-leaders such as cut-price milk, bread and meat.

Lack of competition endangers the dairy and beef industries, just as it has destroyed our fruit and vegetable industries e.g. potatoes, stone fruit and more recently tomatoes.

We are importing more than we produce.

We are a large country surrounded by ocean yet import 72 per cent of the fish we eat.

We are a long way off becoming the "Food Bowl of Asia" as we head towards being a net importer of food.

How can that happen in a country with as much rich and fertile farming land as Australia?

Call that food security?

Australian agriculture lacks the political leadership to ensure a long-term healthy, vibrant agricultural sector.

The answers are clearly difficult but must be found if Australia is to remain not only self-sufficient but also a net exporter of food.

Governments have been prepared to repeatedly help out our uncompetitive car industry and more recently Alcoa.

What about helping out our farming industries to ensure our future food and fibre security?


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