Milk price index: Pricing backdown as plans watered down

The Weekly Times understands Australian Dairy Farmers and Australian Dairy Products Federation lobbied the Federal Government to dump a proposal put forward by the group originally contracted to develop the index — Webber Quantitative Consulting team.

Members of the consultancy said they originally proposed an index, which gave farmers an indicative milk price, based on weighted international dairy commodity prices, less processors’ costs of production.

The highly respected Webber team included former head of the Australian Bureau of Agricultural and Resource Economics and Sciences Dr Brian Fisher, US dairy farmer and benchmarking analyst Marvin Hoekema and local dairy farmer and industry experts.

But team members said the project was undermined from the start, with the department almost halving its original pre-election commitment of $2 million towards developing the index, following “industry demands”.

“We were told industry decided we didn’t need (the funding for) promotion and education of the index, to help farmers understand it,” one of the consultancy team said.

Government records show the Industry Advisory Panel to government on the index consisted of the ADPF and ADF.

Details of the Federal Government contracts show Webber was originally awarded the contract to develop the milk price index on November 29 last year for just $1.19 million.

The consultancy team still went ahead with the cut-down budget, briefing 16 industry stakeholders, including ADF and ADPF, on the index at a meeting in Melbourne on December 14. “The Department of Ag people said they were reasonably happy with the meeting,” a consultancy team member said.

“But 24 hours later we got this email from Canberra saying industry wasn’t happy with what was happening at all.”

And Webber’s contract was cancelled.

The source said the whole idea of the index became political, because it was going to put a lot of pressure on the local processors’ costings.

“It was going to create a lot of controversy,” the source said.

“The path the group was going down exposed just how inefficient Australian processors were compared to the rest of the world.”

The Webber team members were then gagged from talking about the project.

A copy of an email sent by Webber team leader Galina Barrett to farmers states: “We have been under a ban on communications with stakeholders since 15 December. It was highly unusual”.

But federal Agriculture Minister David Littleproud said the contract “was terminated by mutual agreement”.

ADPF executive director Peter Stahle refused to answer questions on whether processors had lobbied the government to cut the contract funding or to terminate Webber’s contract following the December 14 briefing.

In a one-line statement Dr Stahle said “ADPF supports the provision of a (new) MPI and looks forward to its imminent launch.”

However it appears ADPF and ADF have taken control of the project, which will now develop an index based on a simple survey of farmgate prices and the latest dairy commodity prices.

In a February 6 email to his processor members, Dr Stahle stated: “Today I attended a meeting to discuss the next steps in delivering the Milk Price Index, following on from the termination of the services of the original tenderer.

“The index will include two parts: Part 1 — a commodity price index based on global data, which would additionally indicate near-term trends.

“Part 2 — specific regional supplements that would, with brief commentary, refer to how farm gate prices had been impacted by market conditions. This would include a median price paid for milk (with a range), developed through a survey of farmers in the respective regions.”

Mr Littleproud said the new milk price index would include an education component, including fact sheets, videos and workshops, to be developed by the RM Consulting Group.


Source: The Weekly Times


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