In 2017, as dairy processor Murray Goulburn announced plans to sell the co-operative's assets to Canadian-based Saputo Dairy Australia for $1.3 billion, a group of five dairy families from North East Victoria aimed to take their future into their own hands.
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CO-OPERATIVE: Mountain Co-operative members Stuart Crosthwaite with his daughter Indi, Darren Sagrera and Teresa Hicks are looking towards a positive future.

The group, initially centred on the Kiewa Valley, formed the Mountain Milk Co-operative Pty Ltd in 2017 and started trading on July 1, 2018.

One of those farmers, Stuart Crosthwaite, who had returned as the fifth generation on his family farm 15 years before, became the inaugural chair of Mountain Milk.

Mr Crosthwaite said the dairy families and their consultant Patten Bridge, who became the company’s first chief executive officer, had spent 18 months piecing together their new business before Murray Goulburn “self destructed”.

“I think we all realised we were geographically cornered,” Mr Crosthwaite said.

“Our only route to market for our milk was Murray Goulburn. That’s okay if your processor is functioning well but we were feeling a little under pressure as Murray Goulburn was starting to not perform.

“We, hand on heart, thought if we could bring another processor into the region and give the community a second choice that would be a great outcome.

“The things we revolve around on a day-to-day basis are about reducing risk, improving security and having greater control of the marketing and the returns we get for our milk.

“But it’s certainly not about a group of farmers just getting a little bit more for their milk. We chose a co-op to create an outcome for the community. There are inherent links between a co-op and its community.”

Patten Bridge said the farmers’ early discussions reflected the frustration of their increasingly limited control over their route to market.

“Between half a dozen farming families, we were asking ‘how do we regain control of our farming futures?’ And at that point the only commitment was ‘let’s continue this discussion and see where it goes’.”

The Federal Government’s Farming Together Program emerged as the means to put together a plan that would make change a reality.

The farmers’ successful application gave them funding to work through the first three to four months before further funding supported the second phase — the development of a business case for their preferred co-operative model.

“We gravitated to the co-op because we wanted everyone to be equal,” Mr Crosthwaite said.

“So whether you were 1000 cows or 100, everyone gets one vote and every kilogram of milk solids gets paid the same. That’s why we chose the co-op because we didn’t want people taking shares of profits, it had to be equal.”

As part of the business case development, three of the company’s directors — Mr Crosthwaite, Scott McKillop and Alice Holloway — undertook an additional commitment of 12 months of on-line study with the University of Newcastle, covering co-operative history, law and governance.

“I think that really opened our eyes because our only benchmark as a co-op had been Murray Goulburn,” Mr Crosthwaite said.

“Doing the study really opened our eyes to the potential of a modern co-op.”

A concentrated and ongoing commitment of time from all directors in the initial 12 months refined the strategic plan, a constitution, business plan and values.

“That strategic plan and business plan we have revised once, and they are a foundation to operate from,” Mr Crosthwaite said.

“We didn’t want to be a milk-broking business. We didn’t want to have something where we were arm wrestling for another 10 or 20 cents a kilogram for our milk.

“We wanted something that was not only going to deliver good stable returns, but we wanted to see how we could help each other and work together. That’s another reason why we chose the co-op. It’s all about collaboration and working together.”

The co-operative’s eight members, located across the Kiewa, King and Yackandandah valleys in north-east Victoria, are now producing between 22 and 23 million litres annually.

Their milk is going to Freedom Foods, Gundowring Ice Cream and Lactalis, formerly Parmalat. Gundowring Ice Cream is a multi-award winning manufacturer in the Kiewa Valley that markets its production of a premium product based on local providence.

Between half a dozen farming families, we were asking ‘how do we regain control of our farming futures?’
– Patten Bridge

A partnership agreement with Freedom Foods provides for the processing of 20 million litres of milk per annum at Freedom’s Shepparton plant for the company’s UHT milk, high value protein and infant formula products headed to domestic and export markets.

“When we set out to put the co-op together we wanted to have a really strong and healthy relationship with a processor,” Mr Crosthwaite said.

“Freedom approached us when they heard about what we were trying to put together. They wanted to get closer to farmers and be able to understand what happens on farm and work together a lot better. It’s been a great relationship from day dot.”

Mr Bridge said: “I think it is also enough to say that they have been very supportive in working with us around stable pricing arrangements.”

Both Mr Crosthwaite and Mr Bridge say redressing the supply chain imbalance that had tipped control too far in favour of retailers and processors has met one of the farmers’ key goals.

“The variable pricing systems were encouraging farmers to grow milk when it wasn’t suited to the farm,” Mr Bridge said.

“All the scientific and economic evidence was that farms were more profitable when they were about to grow most of the milk at a time when they were grazing most of the pastures.”

Mr Bridge said the farmers also wanted to come up with a model that would give consumers a clearer line of sight around to where their food comes from and the values that underpin that.

“We’re amazingly proud of how we farm and where we farm and the quality of the product that we produce. We should be enjoying the real value of that, the true value of that,” Mr Crosthwaite said.

Chasing flat milk price incentives under any of the processors had previously led Mr Crosthwaite to milk his cows through the winter and the wettest part of the year.

“For me, for my particular farm, we’ve now got multiple years of pricing so I’m deploying more of my cows to calve in the spring with the aim of dropping my costs of production and making the farm more profitable. Is that not exactly what we set out to achieve?” he said.

“If I can start to focus on bringing my costs down by not feeding as much and not having to bring as much stuff in and reduce the intensity of farming over the winter it just makes a lot of sense.”

Mr Bridge said the co-op has restored confidence to farmers “knocked about” when Murray Goulburn went through its price “claw back” period.

“People are more interested in the business and are secure about what their price is going forward and secure that if they are running profitable businesses around that price then they can actually concentrate on their business,” he said.

Mr Bridge said almost all of the co-op members were now secure about price and making significant capital investments on their farms. Their investment projects include new infrastructure, expanding landholdings, renewable energy, irrigation, animal health and welfare, and fertility management.

Mr Crosthwaite said dairy farmers were increasingly running larger and more complex businesses, often employing multiple staff who were not family members.

“They’re engaging in complex business operations that have challenges in HR, business and animal welfare,” he said.

“If you have a look at the figures in the Australian dairy industry, there are still far too many people working far too long hours and having mental health issues.

“The whole model is really stretched. Part of what we are saying is we want to create a space to be in dairy where we are really looking after people, creating good lifestyles and good businesses.”

And what of the future for Mountain Milk? Mr Crosthwaite said the co-op was not necessarily focused on growth.

“It’s about what we set out to do, find the true value of our milk,” he said.

“We don’t want to bring whole heap of people on to something for the sake of growth. It’s about finding value. It’s about helping each other and getting a better outcome for our businesses.

“I think we’d like to grow a little bit more to have a little more scale. But there’s a whole heap of other things on the agenda.”

Mr Bridge said the Mountain Milk farmers had put a lot of work into finding their values and who they wanted to be.

“We’re really interested in finding those want to be on that journey with us, but we’re not interested in compromising those values for the sake of growth,” he said.

Mr Bridge said an ongoing challenge for co-operative members was shutting out the “noise” of the price climb in the short-term milk market.

“Farmers now have to make decision themselves. They’re out in the market looking at options and for most they are chasing price,” he said.

“We are trying to take a longer-term view, and trying to build a really solid foundation for the future.

“The strength of work we did initially has allowed us to stay on course. They (the co-op members) have been so engaged in building the foundation. If we hadn’t done that, I’m sure people may have gone elsewhere.”

Mr Bridge said the co-operative and its members had drawn external interest to support pilot studies in new ways of dairying.

“Working with Dairy Australia, our farmers are looking at calf management in developing an animal health and welfare framework in which all our farms are benchmarked and reviewed against that framework,” he said.

“Another project revolves around data collection on farms and using mobile phones in an innovative way to improve that data capture.

“Then Melbourne University has asked us to look at the organisation of work on farms and how that is changing by reviewing a French workplace assessment model under Australian conditions.

“Part of our values is about giving back; saying we’re interested in the future of dairy, we’re passionate about the industry.

“We’re interested in creating a better future and we’re happy to be a part of contributing to creating that future through being involved in this research.”

In dairy risk management, one size does not fit all. Throughout recent history, a number of dairy-related risk management programs, some available through private crop insurance providers and others available through the Farm Service Agency (FSA), have been designed to fill gaps in protection against market risk and uncertainty.

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