Hunter dairy industry shrinking under high costs, low prices and harsh weather

Retail outlets from supermarkets to farmers’ markets are groaning with dairy produce, from artisan cheeses to buckets full of yoghurt.

Yet despite this boom in consumption, the plight of the Australian dairy farmer appears almost uniformly bleak, with producers in various traditional dairying areas including the Hunter Valley finding it too hard to continue under a triple whammy of rising costs, falling prices and increasingly unpredictable weather.

Add in concerns for some farmers about adequate water allocations, and you have a situation that is resulting in fewer farms being handed on to the next generation, and more and more producers leaving the industry.

To some degree, this is an old story. Farming has always been a tough and unforgiving business, and the reality of market forces often make farmers price-takers, rather than price-setters. But the sad facts of the matter are that deregulation of the dairy industry appears to have been a less-than-successful policy as far as most farmers are concerned, especially for those whose dairies have been smaller, family-run businesses.

Although many of its farmers are in Victoria, the problems with the stockmarket-listed Australian Dairy Farms Group are emblematic of those facing the industry as a whole. As it noted in its recent annual report, prices paid to farmers are often “extremely low”. While the public as consumers may be able to buy milk at very cheap prices, thanks to the discounting war run by the two major supermarket chains, the low farm-gate prices paid for non-premium bottled white milk are often not enough for producers to make a profit.

So where to from here?

Some farms are making a go of things selling high-quality organic products, but this will probably always be a niche area of the market, and not something that suits every farmer, or, indeed, every consumer.

That said, the heavily marketed a2 milk company is clearly doing something right, with a share price that has gone from 56 cents to more than $12.50 in three years. The trick for the overall industry is to see the money that is clearly still there in milk, distributed a bit more evenly.


Source: Newcastle Herald


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