Floor price for farmgate milk senate debate heats up

That's why even Labor's Joel Fitzgibbon, who took it to the last election and supported Pauline Hanson's senate bill, is not actually ready to make a minimum farmgate price law.

Instead, the proposal is to have the Australian Consumer and Competition Commission (ACCC) investigate the idea.

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But the regulator itself doesn't seem keen on the concept.

"Introducing regulation of farmgate milk prices in Australia would raise several region-specific and complex economic, social and legal issues," the ACCC's submission to the senate inquiry reads.

It said these included:

The ACCC warned that the distortion of the market could see Australian dairy farming again split into domestic and manufacturing regions.

"... While some farmers may be better off with a higher farmgate milk price, others may be unable to find a buyer for their milk at all," the submission said.

"Consequently, to minimise the impact of regulation on export competitiveness it would likely be necessary to create a domestic/export market milk distinction when determining a minimum farmgate milk price."

Federal Agriculture Minister David Littleproud said the government had already acted to improve dairy farmer fortunes.

"The dairy code of conduct is now taking effect, providing farmers with a clear minimum milk price from processors over the course of a contract, giving them greater bargaining power in negotiations," Mr Littleproud said.

"And when it comes to code compliance, the ACCC will be the tough cop on the beat.

"We can't be distracted by populist quick fixes that harm our dairy farmers in the long run.

"The coalition is working hard to support our dairy farmers to reduce input costs and support them through the drought, with $22 million of election commitments funding a range of initiatives specifically to support dairy farmers."

But Mr Fitzgibbon said it was important more was done to reshape the dairy industry.

"The problems in the sector are structural and only structural intervention can help our farmers," he said.

"A code of conduct alone is not enough and obviously the market is not correcting the situation and the disadvantage farmers find themselves in."

He said Labor would not entertain taxpayers propping up the milk price but did not rule out management similar to Canada's quota system.

"We're talking about a floor price marginally above the cost of production set by the regulator itself," he said.

"The alternative is to allow the ongoing payment to farmers below the cost of production and then one has to ask what impact that's having on supply and demand.

"And the answer to that is nil."

While experts from the Department of Agriculture told the senate that Australia's "relatively low cost of raw milk production is an important part of our competitiveness", Mr Fitzgibbon flatly rejected the assertion.

"If, to compete on export markets, we have to pay our farmers below the cost of production, it's not a market we should be in," he said.

"That increase in farmgate income would help farmers reinvest in their properties and their systems to allow them to increase productivity.

"People need to take those knock-on effects into account."

Any extra money would come from the supply chain.

"It's most likely to come either from the margins of processors, which in a properly operating market beyond the farmgate price would be either absorbed by the retailers or passed on to consumers," he said.

The Department of Agriculture also argued a regulated milk price could violate Australia's Free Trade Agreements and see the World Trade Organisation retaliate with sanctions.

But the Bills Digest, in which government lawyers advise parliamentarians, said the risk was considered low.

"Senator Hanson is correct in her assessment that the measures in Schedule 1 to the Bill will not breach the Agriculture Agreement unless the base milk price has the effect of encouraging dairy farmers to significantly increase their milk production," the advice reads.

In the meantime, the Greens have built a new proposal.

It would require dairy processors to seek permission from the ACCC if they wanted to cut prices below the prices they had paid over the last 12 months.

"That would create a role for the ACCC in monitoring and, if need be, intervening on prices while being less drastic than suddenly imposing a price floor," Greens senator Janet Rice said.

"Most importantly, it would ensure that a sudden and unconscionable price drop, like that in 2016, would never happen again.

"If the situation was repeated, the dairy processors would have notified the ACCC of their intent to decrease prices and there would be an opportunity to object, to intervene and to prevent the tragedy that occurred in 2016."

Independent analyst Norman Repacholi said much of the proposals lacked depth and industry would be wary.

"I'm not sure many were happy or confident in the ACCC dairy inquiry so why would they be confident that the ACCC could get minimum milk pricing right?" he said.

The senate inquiry will travel to Mt Gambier on Wednesday, April 15; Toowoomba on Wednesday, April 22; and Warrnambool on Friday, May 8 to hear from farmers.

You're invited to send in questions for five politicians with an influential role in deciding how the farmgate milk price is set.

The current senate dairy inquiry is still active and coming to Victoria and South Australia to seek input from farmers.

Ahead of the hearings, five politicians have agreed to answer readers' questions about the inquiry and, especially, how dairy farmers believe the farmgate milk price should be set.

All the politicians responsible for the agricultural policies of each of their parties have agreed to answer Stock & Land reader questions, including:

Our national rural affair reporter in Canberra will video the politicians while they answer readers' questions.

We'll post the videos online and include a summary in the following week's paper.

Email your written or videoed question to marian.macdonald@stockandland.com.au or text 0475 954 446.

Tell us your name, your role in agriculture, where you are from and which politician you would like to respond, by 5pm Thursday, March 19.