Dairy Industry Crisis

Duncan B.

Australian dairy farmers have been hit hard recently by the actions of two of the Australia’s biggest dairy companies, Murray Goulburn and Fonterra.

Both companies announced that they were reducing the price paid to dairy farmers for their milk from $5.60 to $4.75-$5.00 per kilogram milk solids. Goulburn offered farmers a “milk support pledge” to keep the price at $5.47 per kilo for this season. Farmers are required to repay the difference between the farm gate price and the support price over the next three seasons.

Fonterra is also offering support loans of 60 cents per kilo, but requires its suppliers to repay these “clawback” debts averaging $128,000 per farm.

The effect of this price reduction for their milk is devastating on many dairy farmers who are already struggling to survive. Many have already sold their cows and gone out of dairy farming. It is predicted that with lower milk prices next year a fifth of Australia’s dairy farmers could go broke.

Dire predictions are being made about the flow-on effects to shops, farm supply companies, transport companies and everybody else in country towns that are dependent on the dairy industry.

Dairying is big business. The dairy industry in Victoria employs about 21,700 people in Victoria. Victoria’s three main dairying areas are Gippsland, western Victoria and the Murray region. Victorian milk production is about 6.6 billion litres of milk per year, which is about 68% of all Australian milk production.

Victoria’s annual milk production is valued at about $3.1 billion at the farm gate, and the “ex-factory value of domestic sales” is valued at about $4.4 billion. Victoria’s dairy exports are worth about $2.3 billion, equal to about 80% Australia’s dairy exports.

Murray Goulburn was formed in1950 by 14 dairy farmers. Today it has 9 plants in Victoria and Tasmania and processes 35% of the nation’s milk supply. MG has 2500 supplier/shareholders. 

Fonterra is a New Zealand-based dairy farmer co-operative. It has 10 manufacturing sites in Australia and processes 1.6 billion litres of milk each year from 1200 suppliers. It is the world’s largest dairy exporter with 40% of global dairy trade.

Various factors are being blamed for the problems of the dairy industry which have led to the price reductions for dairy farmers. These include currency fluctuations, world over-production of dairy products, sanctions on Russian imports of dairy products and reduced Chinese demand for dairy products.  Murray Goulburn massively over-estimated the Chinese demand for dairy products and was left with excess stock, a cause of some of the company’s current problems. World milk prices fell by 65% between February 2014 and August 2015 as a result of these factors.

There are no simple answers to the problems facing dairy farmers. Suggestions such as a boycott of cheap supermarket milk or a levy on milk have been made. These would be of limited assistance as only a small percentage of milk production is actually consumed as liquid milk.

State and federal governments have announced assistance packages for affected dairy farmers. These may help in the short term but will not alter the long term picture of ruin for many dairy farmers.

Farmers have always been at the mercy of droughts, floods and other natural calamities. Over the decades they have learned to cope with natural disasters and take them in their stride. What they find harder to deal with are the man-made disasters inflicted on them by governments, banks, supermarkets and the agribusiness companies that supply the seed, fertilisers, machinery and other farm needs, and who control the sale of their produce.

Dairy farmers, like all small farmers, must realise that their true interests lie with the working class in the struggle for an independent Australia.

The list of key tasks and demands put forward by the CPA (ML) provides a useful basis for unity between workers and farmers. Many of the immediate demands would be of enormous benefit to farmers and rural people. 

How much better would their lives be if the banks were nationalised, foreign investment controlled and better schools, hospitals and public transport made available in country areas? 

Farmers would breathe easily knowing that prime farm land was safe from land grabs by mining and gas companies.  Farmers would be able to sell their produce to the world on the basis of equal trading agreements, not predatory agreements such as the Trans-Pacific Partnership and other so-called “free trade agreements.”

Let us build the unity of the working class and farmers and country people!