FARMERS hold no control over milk prices, but they could influence the escalating cost of production through farming systems and advocacy.
That was the message of Victorian Farmers Federation president Peter Tuohey, who opened the United Dairy Farmers of Victoria (UDV) conference in Melbourne today.
“Cost is the only thing we’ve got a hope of changing,” he said.
UDV president Kerry Callow agreed, and added that in response to the current economic downturn, the group had focused on an industry solution – rather than a government solution.
“Why did we do this? Because we operate in a free market. The farm-gate price is set by the market through the processing sector,” she said.
“We’ve received intense backlash for this approach from some farmers, who believe we should have been focused on a short term solution by way of Government intervention through cash injection. “There is enthusiasm for this approach, but let us be clear on one thing. It is a band-aid solution.”
She said if the industry failed to address the current underlying problems, it would continue to require periodic “band-aids”.
Adam Jenkins - who is a Nuffield Scholar and UDV representative - said the UDV could not set the milk price, but it could influence farm profitability.
“The last couple of months we have been throwing mud at industry and at each other, but the more we do this, the more we lose focus on key goals overseas,” he said.
He added that the UDV could play a big role in capturing international markets, while leading the discussion on carbon tax, labour reform and energy.
One of the conference’s key debate platforms was the issue of milk pricing structures and how the flattening of the milk curve impacted on profitability.
Farm consultant Neil was commissioned by Dairy Australia to investigate this topic and released the results to the 200-strong crowd at the conference.
Using farm modelling and the Department of Primary Industries (DPI) annual farm monitor data sets, he revealed that despite concerns – there was no connection between a swing to flat milk supply and lower returns.
“What we found was that - and sometimes you need to do one of these studies to state the bleeding obvious - but grazed pasture percentage is the primary economic driver on farm,” he said.
Murray Goulburn’s Robert Poole also told the crowd that the flattening of the milk curve was not a new thing and had been happening for the past 20 years.
But the past decade had seen a complete upheaval of the industry in terms of markets, competition milk supply and the behaviour of dairy companies.
Next week, the cooperative will be informing their suppliers of the results of its milk pricing review, which Mr Poole described as the most comprehensive of any milk pricing reviews completed in Australia.
“You didn’t have to convince us this needed to happen, we knew it was due,” he said.
After extensive consultation, as well as an online farmer survey (which 590 of 2500 suppliers responded to), MG found that 66 per cent of suppliers were happy with the current payment system, while 33pc were not.
“That is a figure we take very seriously,” he said.
He said the Board were happy the new system was fair and took into account on-farm profit drivers.
Incoming UDV vice president Tyran Jones also weighed into the debate, saying the most important point in pricing systems was transparency and that was not happening at the moment.
Poowong dairy farmers Peter and Wilma Mackay, who milk 230 cows, said implementing a risk assessment plan was crucial to being profitable, but clearer pricing systems would be of assistance.
“The thing for us is the complexity of it all,” Mr Mackay said.
“If a comparison could be made between the systems and companies, it could be a big help and that’s where UDV could play a role.”
The conference continues tomorrow.