SEE that empty paddock over there? That’s where the horse was before it bolted.
The horse, in this case, is dairy company Murray Goulburn and the carnage it has caused to the Australian dairy industry.
The Australian Competition and Consumer Commission this week recommended a mandatory code of conduct for the industry to rectify the power imbalance between farmers and the dairy processors.
For thousands of former Murray Goulburn suppliers, it appears to be a case of too little, too late. The co-operative this week officially passed into Canadian hands.
The ACCC found that even where the farmers owned the processor — as was the case with Murray Goulburn — that didn’t stop the co-operative screwing the farmers.
The ACCC discovered an industry where all the power rests with processors, where farmers are rarely told accurately what they could expect to be paid for their milk and where the processors had all the information and the farmers very little.
“Processors are also far better informed about the minimum price that farmers are likely to accept than farmers are about the maximum price that processors are willing to pay,” the report concluded.
It found contracts between processors and farmers were so heavily in favour of processors that the companies could claw back money from farmers for milk supplies months before, as Murray Goulburn and Fonterra did two years ago, without fear of retribution.
Farmers, the ACCC discovered, can’t readily jump out of dairying into another enterprise, because they have so much invested in what is basically an on-farm factory in the form of a dairy.
And the power imbalance leaves farmers unable to invest in their farms to become more efficient, because they never really know what their income will be.
The cycle is crippling for many, particularly, those on smaller farms.
The report paints a picture of the big end of town running riot because it can. Mmmmm, sound familiar?
A mandatory code of practice would compel processors to provide far greater levels of information to farmers.
Yet, the push for a mandatory code has been opposed by the industry’s two biggest farmer groups, the United Dairyfarmers of Victoria and Australian Dairy Farmers.
They both have said a review of the current voluntary code of conduct needs to be completed before a mandatory code should be considered.
I can’t see a lot of their farmer members agreeing with that stance.
Ironically, concerning the other controversial element of the industry, the ACCC gave the $1-a-litre milk in Coles and Woolworths a pass, saying the price on the shelf made little difference to what farmers were paid.
According to the report: “Farmers’ lack of bargaining power means that they are unlikely to benefit from an increase in the retail (or wholesale) prices of private label milk or other dairy products.
“Even if processors were to receive higher wholesale prices from sales to supermarkets, this does not mean the processors will pay farmers any more than they have to secure milk.”
The report paints the picture of an industry completely out of whack.
But a 240-page report could never sum up the imbalance in the dairy industry more than this single line revealed in The Weekly Times last week: Murray Goulburn chief executive Ari Mervis will be paid $5 million for 10 months’ work this financial year.
If only the farmers could get the same deal.
Looks like the horse had plenty in its saddlebags when it bolted.
ED GANNON IS PUBLISHER OF THE WEEKLY TIMES AND CO-HOST OF THE AG SHOW ON SKY NEWS BUSINESS
By: ED GANNON
Source: The Weekly Times