Struggling dairy producers in Western Australia’s South West say they hold concerns for the future of their farms, after receiving new contracts from milk processor Brownes. By: Kit Mochan and Benjamin Gubana
Documents provided to the ABC show the contracts, which were issued to some farmers just last week, will see producers fined for under-supplying milk.
The news comes 12 months after four producers’ contracts in the region were not renewed by the company, due to a global over-supply of milk.
The clause would see a fine imposed of five cents for every litre not provided to Brownes, if the farmer meets less than 90 per cent of their monthly quota.
There are concerns that the five cent penalty may increase after the first 12 months of the three-to-five-year contracts.
WA Farmers Dairy Section President, Michael Partridge, said the new contracts were unreasonable and it was a major concern for the industry.
“It’s pretty unprecedented,” he said.
“With the events of the last year, with a few farmers having their contracts cut and being pushed out of the industry, that has made it a lot worse.”
“People are a lot more frightened than they should be. It’s not the way business should be done.”
Some of the documents were sent after most Brownes contracts expired at the end of June, leaving farmers with little time to prepare for the changes.
Concern over a lack of understanding
One producer in the state’s South West, who wished to remain anonymous, said farmers had “lost all faith” in Brownes.
The producer said the company’s owner, private equity firm Archer Capital, had a lot to answer for.
“[Archer Capital] has come in and said that they want to make money.
“This is our livelihoods and they don’t know what they are doing.”
Archer Capital currently has plans to sell Brownes.
“If there are no farmers left and no milk, who is going to buy the company?,” the producer said.
Mr Partridge said the firm did not understand how variable milk production was.
“A lot of the actions Brownes have done has shown that Archer Capital hasn’t had a dairy history, and doesn’t understand dairy production systems,” he said.
“Some of their decisions have been very ordinary.”
The contracts also state that Brownes may refuse to collect and pay for milk that is 10 per cent above the agreed amount.
However, an exclusivity clause means farmers would not be able to supply the excess milk to other processors unless they secure approval from Brownes.
“When you’re dealing with a fresh perishable product … you’re in a [pretty tight] situation already,” Mr Partridge said.
Signing under pressure and afraid to speak out
Farmers told the ABC they felt pressured to enter into contracts, and feared facing the same fate as their colleagues that were forced out of the industry.
“Does the WA shareholder know their profit is coming at the expense of the WA farmer?” one said.
“There is nothing we can do. You don’t have to sign, but then you’re uncontracted.”
There are concerns Western Australia’s dry winter will make matters even worse for dairy farmers.
Higher grain prices cause the average cost of milk production rise.
The current price farmers receive for grade 2 milk is 45.6 cents a litre, compared to 46 cents a litre two decades ago.
“I don’t know what my cost of production is, and I don’t want to know or I wouldn’t get up in the morning,” said one.
Brownes has been contacted for comment but had not replied at the time of publication.