A prominent Victorian businessman is canvassing the Federal Government about a proposal to add 40 cents per litre to the price of milk in supermarkets.
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A new proposal to the Federal Government seeks to put more money back in farmers' pockets.(ABC Rural: Brett Worthington)

Key points:
An independent proposal seeks to guarantee an extra 13 cents a litre for farmers
The proposal suggests an independent entity would give the money back to farmers
The dairy industry has been struggling with dollar-a-litre-milk, drought and a decline in farms
This new proposal — essentially a partial re-regulation of the dairy industry — could deliver a windfall to farmers who have battled dollar-a-litre milk since 2011.

The ABC has obtained a copy of John Dahlsen’s proposal to the Government.

While Mr Dahlsen has served on the boards of companies including Woolworths and the ANZ bank, and is the chairman of the JC Dahlsen Group which operates Dahlsens hardware stores, he said he had no vested interest in the dairy industry.

The proposal suggested that up to 40 cents per litre be added to the retail price of fresh milk and an “independent entity” would collect this revenue to pay it back to farmers.

“This effort is because of my diverse experience, background and hopefully the ability to look clinically without history on the issues facing the sector,” Mr Dahlsen wrote in his paper.

Proposal to bring more cash to farmers

In his report, Mr Dahlsen calculated that an increase of 40 cents per litre on supermarket shelves would result in an extra 13.3 cents per litre at the farm gate, due to the complex nature in the way dairy farmers were paid.

The Australian dairy industry was deregulated in 2000.

Dairy Australia said for most states “this meant the discontinuation of regulated sourcing and pricing of drinking milk”.

In recent years the number of dairy farms operating in Australia has continued to decline, as has the country’s milk production figures.

These factors combined with drought and other challenges have culminated in what has been widely dubbed the “dairy crisis”.

Mr Dahlsen said “the average Australian dairy farmer is now losing money”.

“With the drought and economic malaise, dairy farmers were falling at the rate of three a week,” he wrote.

“With fires, this increased considerably so we have a sector under even greater stress.”

Detail in the plan

In a letter to Agriculture Minister David Littleproud in which he explained the proposal, Mr Dahlsen highlighted that “even if only a 20 cent increase is achieved it would merely make a farm around break even … An increase of 40 cents is required for a solid improvement.”

Mr Dahlsen said the money would be paid to an independent entity “free of any influence from the processors or dairy farmers” and which would report to the Australian Competition and Consumer Commission.

The money be passed from the independent entity back to dairy famers.

Mr Dahlsen stipulated that Dairy Australia should not serve as the independent entity.

Mr Dahlsen said he had approached several dairy farmers and a former senior analyst at Dairy Australia to review the proposal.

“Given that there is no government involvement and that it is between private parties, albeit with the intervention of a government agency, its objective is not or will not have the effect of subsidising and distorting the export market.

“Also it will not damage the dairy market in overseas countries,” the report said.

When contacted by the ABC, Mr Dahlsen said he was unable to further discuss the proposal at this time.

With a third of dairy farms seeking to fill vacancies ahead of calving season, Kiwis are being encouraged to give dairy farming a chance.

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