dairy farmers – Clover Hill Diaries – Join Me and Be the Change

Learning from the past to get better outcomes for this generation of farmers

I used to be a quiet achiever in the world of pharmacy. Today I have a fairly high profile in the world of Australian agriculture. I make a lot of noise and fight what I believe is the good fight to get a fair return for our farmers. I am not always the most popular person in the room and it’s not easy. I have learnt the hard way it’s a journey ( a long journey) It’s not how much noise you make it’s how you make the noise and who you bring with you along the way that counts

For 25 years of my life I was a community pharmacist working in the main to help support the family dairying farming business. Pharmacy is a rewarding profession even when you were like me quietly putting labels on bottles, researching drug interactions, advising how best to treat burns and talking to customers. Pharmacists have the knowledge and the compassion to guide people through the quagmire and frustration that can be the world of hospitals, multiple medications and the desire to get the best health outcomes for sick people who often see you as their first port of call

It’s a very different world to agriculture; where we are totally overwhelmed with quiet achievers and the world is leaving us behind. The majority of pharmacists can be quiet achievers because there are some very smart people in the world of pharmacy who know how important it is if you are going to be heard in Macquarie St or Canberra you need to be articulate, know that politics is the art of the possible and you need to be a cohesive, collaborative, powerful group of networkers. You need to be loud and proud. This is the reason that the Pharmacy Guild is one most powerful lobby groups in this country

There are a lot of smart people in agriculture and that is where the comparison stops and this is what I want to change. I want the people in the offices in the hallowed halls to tremble and listen and act when the farmer lobbyists go to meet the decision and policy makers

I know there are people in agriculture who could do it better than me and chose not to. So I am on a steep learning curve and constantly seeking out people I can learn from. Figuring out how to ask the right questions and when I get the right answers who are the people to take them to who will actually do something with them. Those people are very short on the ground in the world of dairy. Every day I am reminded just how naive so many of our dairy farmers are. We pay levies and we just expect that the people in charge of our levies can read our minds and this tends to lead to a one size fits all R&D mentality that apparently works in every region no matter what your farming system, topography, soil types et all and decision making that is not always in the best interests of the majority. It also means no-one is listening to us in Macquarie St or Canberra and can’t say I blame them.

So I love to talk to people from other industries, hear what they are doing and always wondering why we don’t do that in dairy. Looking at the diversity of people I met at Crookwell Show. See post here.

Take cattle farmer Ken Wheelwright for example.

Ken and his family realised long ago that farming today is not about working longer hours it’s about being smarter. So after talking to holistic educator Bruce Ward, Ken contacted the KLR Marketing team and became part of their Mastermind Group.

The KLR Mastermind Group is the support network for KLR Marketing. The greatest benefits of being part of this network, Ken believes is that you have access to the vital tools that enable you to profit from your livestock, in any market and he certainly gave me plenty of successful examples. Imagine the value of talking to people who can share their experiences like recognising the recent rain has meant there has been a rapid growth of grass and the cattle market is very buoyant but looking at the medium term weather forecast shows there are some extreme heat events coming which are going to burn that grass off pretty fast and it might be very smart to de-stock by 90% and take advantage of the current high cattle prices. If there is a similar range of services delivered on-line and offline, which include a unique market report like the KLR 30 Second Market report, profit calculators, teleconferences as well as mentoring days in regional areas offering in the world of dairy I have never seen it

Talking to Dr Rod Hoare reminded me how important it is to learn from past knowledge.

Rod is an equine and cattle vet with extensive experience working for the NSW Department of Primary Industries (DPI). Now Chief ground steward at the Crookwell Show and farmer Rod and his partner Helena Warren run a very interesting and diverse farming operation at Cadfor Equestrian and Murray Greys. Rod is also the 2012 Australian Biosecurity Farmer of the Year

I learnt a lot about a lot things from Rod as we drove around Crookwell Show in his little golf buggy.

There are many farmers in the dairy industry that could benefit from listening to Rod talk about the protocols and systems that were in place to ‘keep the bastards honest’ in the on farm milk quality testing process when he was at the DPI. Any farmer who has moved from one milk processor to another who uses a different lab knows how huge the variation in milk quality lab test results can be and how costly that can be. For us one year that was $30K. You can do a lot on farm with $30K. You could employ some-one for half a year. Imagine how much infrastructure repairs and maintenance you could do let alone how many trees and fencing you could do. Build a shade shelter for your cows on hot days, the holiday you could go on, let alone all the staff that didn’t get their milk quality bonus. It wasn’t much fun for them either. There is a small dedicated group of people out there trying to fix this problem on behalf of farmers but getting nowhere because for some reason “the bastards” are happy with the system. Well Rod might just have the answer; it certainly worked in his day.

On our trip to the cattle sheds Rod introduced me to 84 year old Ernie Stevenson. Ernie was a very early and influential member of the Murray Grey Society. A man with a good eye for cattle but admits he is fairly critical which often didn’t make him the most popular judge

Ernie’s daughter Fiona with her husband butcher Mick Battiste have kept the family beef cattle tradition alive at their Woolarainga Stud where they raise Murray Grey and Squaremeaters

In September 2009 Mick and Fiona established Woolaringa Meats as a retail butcher shop, located at 112 Kinghorne Street, Goulburn. They provide free range beef from their own farm and purchase cattle from local farmers like Rod Hoare that suit their specifications. According to Rod, Mick Battiste does all his own butchering and promotion of beef. Mick works on the basis that (like a pharmacist) by taking time to share your knowledge and skills you can give people a better eating experience

The things like we farmers kno, that you make great casseroles with cheap chuck steak not prime costly rump steak

Well done Mick and Fiona running great events like Super Square Sunday

Agriculture time to put your best foot forward

Recently I gave a presentation on Sustainability and very proudly used the dairy industry’s definition as the benchmark

“Our vision for sustainability is to enhance livelihoods, improve wellbeing and reduce our environmental impact so that Australia’s dairy industry is recognised worldwide as a responsible, responsive and prosperous producer of healthy food”
Australian Dairy Industry Sustainability Framework

My presentation was followed by a presentation from one of Australia’s leading marketing gurus and when she put up this slide she challenged the dairy industry to review their definition quoting Seth Godin

The light when on and I thought how right is she. I am reminded everyday how too often the dairy industry and agriculture for that matter fails to be on the front foot. We are at least less reactive and more responsive but how many times do we take the lead.

And there is no better example than the way we market our milk.

These days thanks to twitter I don’t need to read the papers from front to back as I have a number of very astute Twitter followers who can read my mind and share with me newspaper articles they think will be of interest.

Yesterday this story from well known dairy journalist Andrew Marshall lobbed into my twitter feed Milk’s Local Brand Push. It wasn’t until I got to Mike Logan’s comments and thought at least somebody gets it

Deja Vu. It was at least twelve years ago that I sat around the table with the marketing team at Dairy Farmers head office workshopping the latest ideas in milk packaging and labelling. At the table was also the bright mind that was Ed Geldard who was sadly killed in a plane crash in 2007. Dairy Farmers was in the middle of a logo change and a total makeover of their packaging and they were keen for my input. Their research had shown that it might be a great idea to put farmers on the packaging. I remember sitting there thinking that sounds pretty logical cant believe somebody hasn’t done it before. My feedback was I suggested they go one step further and also include farmer stories and market some regional milk.

I was subsequently mortified when I saw what they had in mind. Yes they were going to put a farmer on the pack but not his face his back. After a while they took the plunge and introduced the world to their farmer Martin Hodge but no way in the world would they even think about regionally branded milk.

There were plenty of farmers at that time who had the same idea about putting farmers on the label and marketing and selling regionally branded milk. After talking to Dairy Farmers for a few years trying in vain to get them to launch a NSW south coast brand of milk a group of their gusty farmers started their own processing plant and did it themselves . Wow did Dairy Farmers come down hard on them. South Coast Milk also had the hide to put a farmer on their pack and Dairy Farmers threatened to sue them. Twelve years later its now the ‘in thing’ to put farmers on the pack, put their stories on the back and do regionally branded milk and in the main what a giant waste of time and effort it is

Due to a new role from time to time I find myself in Woolies gazing at milk fridges. Its always the same the shelves are half empty, plenty of Woolies brand everywhere and ten minutes required to find the brand I am looking for.

As you can see because of the way the shelves are tilted (see picture below) to encourage the bottle to move forward it is extremely hard to see the label.

The company as you can see below who have done it the best are very obviously A2.

Dairy companies today have to be very astute indeed with their labelling especially with the 3 litre pack size aimed at families and in a lot of cases the 2 litre pack.

You may think my post harsh but if you were a dairy company and the shelves you were selling your best selling brands from look like this.

Where would you put your brand?. I myself would definitely leave the home brand label where it is

NSW Milk Shortage How dire is it

This picture was recently sent to me by an alert consumer

It is a sign proudly advertising Woolworths home brand milk as permeate free (how predicable was that) Two other things caught my eye. Firstly it warmed the cockles of my heart to see the farmer brands at shoulder height. For those of you who don’t have years and years of retail marketing behind you shoulder height product placement is prized shelf space. It means the customer doesn’t have to reach or bend and it gives your product the highest probability for customer selection

The other thing that caught my eye was “Made from NSW Milk”. Now I for one am very happy that Woolies is spruiking this as a lot of my milk goes into their home brand milk.. It also goes into both the farmer brands Pura and Dairy Farmers ( which you can also see in the photo at shoulder height).

What I do know is milk is being trucked into the Lion factory en mass from Victoria. I don’t know what is happening at the Parmalat factory but I imagine this heatwave and resultant milk from NSW farms plummeting further is also putting them under pressure to outsource milk from Victoria.

The Victorian farmers aren’t happy either See Farmers protest at Warrnambool and a recent Weekly Times poll saying 75% of farmers think the Australian dairy industry is in crisis

I wonder if Woolies and Coles know how dire the milk shortage is and how much longer can Woolies proudly claim their milk is sourced solely from NSW farms. If NSW farmers and processors continue to be put under huge pressure from the supermarket price wars and now drought will we see an Australia wide milk shortage? Glad I have house cow I am not keen on buying milk imported from China. Are you?

BTW Interesting article from Sydney Morning Herald this morning Risk of crying over spilt milk as brands drop off shelves – Read more: http://www.smh.com.au/business/risk-of-crying-over-spilt-milk-as-brands-drop-off-shelves-20130118-2cyq0.html#ixzz2IO5UUy4V

Coles no-one but you believes the spin anymore

I have been quiet on the milk wars saga of late. This is in main because I am finding it hard to keep up and its exhausting me. All in all the whole debacle is just bizarre. One minute large numbers of NSW and QLD dairy farmers are being paid just 12c/litre for large volumes of their milk known as T2 milk. The next minute they are being told all their milk will be paid at T1 price (full price) from February to July 2013. Then they have just being told they will be paid at T1 price as of 1^st December 2012. Fantastic news if cows where machines and you could just turn their udders on and off but it appears that whilst the rest of the world knows they aren’t machines but living breathing things the milk processor Lion doesn’t

Then the Xcheque newsletter lobbed into my in tray this morning and allowed me to share with you a reasonably uncomplicated update on the milk price situation and farmer exits. Xcheque is owned by the very insightful and bright mind that is Jon Hauser. The newsletter directed me to this excellent article penned by Kai Tanter and titled “Let them eat cake – the ongoing saga of T2 milk price and a Lion in winter”

So for all the fabulous dairy farmers supporters out there here is an update on the situation at the farm gate from the experts

Let them eat cake - the ongoing saga of T2 milk price and a Lion in winter

“Let them eat cake – the ongoing saga of T2 milk price and a Lion in winter” by Kai Tanter

What kind of responsibility do processors have to their farmer suppliers? The fight around tier two (T2) milk payments in Australia is one where domestic processors, and their supermarket customers, seem to want to have their cake and eat it too – flat milk all year round but at a market benchmark price that has no relevance to this requirement. This has resulted in a commercial and public relations mess. It also appears to have triggered another wave of farmer exits from the Australian dairy industry.

Lion is the processor who has copped the most flak over this issue from farmers recently. They may be moving into their good books after announcing a price rise for the first half of next year. Their NSW, Queensland and Tasmanian suppliers, many of whom claim they have been treated unfairly by Lion, will no longer be subject to T2 milk prices from February to July next year. The T2 price is currently 15 cents per litre (averaging around 12c/litre ). This will be replaced by the T1 price for all milk – currently 47.5 cents per litre for northern NSW and southeast Queensland.

The most recent round of T2 prices were introduced in July of this year. The price is for milk that exceeds Lion’s requirements for their domestic fresh dairy product business. Many farmers were in uproar and said that they could not produce milk at those price levels, or at the effective average price of tier one (T1) and T2 milk. This however seems to have been the point. Lion said that they had too many farms in NSW and Queensland and that they didn’t need the milk, and especially during Australia’s peak production period across spring and early summer.

“Basically there needs to at some point be a rationalisation of the amount of farms that are in those two states,” said Lion’s director of procurement, Murray Jeffrey.

Things seem to have changed over the last couple of months, hence the removal of T2. But why? Australia’s pasture based milk production is highly seasonal and it is normal for more milk to be available in some months than others. Lion says that it is the recent decline in milk production that has allowed them to make the change.

“Given that there’s been a steady decrease in volume over the last two or three months it’s allowed us to purchase Tier 2 milk at Tier one prices in South East Queensland and NSW,” said Mr Jeffrey.

Figure 1. Central / North New South Wales + Queensland milk production.

Less now, maybe more later – but at what cost?

Lion’s price attack on surplus milk might have given them more than they bargained for. The Land recently reported that since the introduction of T2 pricing in July, Lion’s milk receivals have decreased by 15 percent relative to two years ago. This is much more than a normal season decrease, especially against the background of relatively good rainfall and low prices for irrigation water.

It’s not just in the last three month’s that Lion’s receivals have fallen. Ian Zandstra, president of Dairy Farmers Milk Cooperative (DFMC), who are Lion’s major supplier of fresh milk, estimates that Lion’s milk pool from DFMC suppliers has decreased by 20 percent in the last two years. He attributes this to the low milk price.

The seasonality of Australia’s milk production is in part responsible for this situation. There is a lack of fit between the demand for dairy products, which stays the same all year round, and the supply of milk, which varies depending on the season. Processors like Lion want to be guaranteed a set supply of raw milk all year round, but if a traditional dairy tries to meet this demand, it results in surplus milk during high yield months.

The two tier milk price system has been devised to send a clear message to supplier about how much milk the processor (=supermarket and consumer) wants and when they want it. It is not a bad idea in principle but the brutal and uncommercial value that has been placed on T2 milk completely undermines the overall value of the dairy enterprise.

The justification for the low T2 price is that this is the effective return to the processor when they transport it to Victoria and sell it to a commodity processor. In other words “It is not our responsibility to add value to this milk … and by the way you will have to pay for the cost of getting rid of it”.

The supermarkets are just as culpable in their denial of responsibility for this milk. From an earlier article:

Coles claim that they have no effect on T2 prices, saying that their retail and farmgate milk prices have been decoupled. “Coles’ house brand milk contract with Lion is based on tier one milk pricing… [and] Coles has no influence on Lion’s decision to reduce tier two milk prices,“ said a Coles spokesman.

They might be one step removed from the buying process but in our opinion the supermarket chains cannot divorce themselves from the economic reality of the dairy industry.

The underlying assumption in the argument presented by the spokesmen for Lion and Coles is that the price for T1 milk is fair and reasonable compensation for the flat milk production profile they require. According to Murray Jeffrey:“We already pay NSW and Queensland suppliers a premium on the world price.“

But do they, and what is the world price? It turns out that the world price is the price that export processors can extract from world markets for commodity dairy ingredients. It bears no relationship to the price that farmers are paid for fresh milk in other developed countries, and it certainly bears no relationship to the cost of producing milk on a flat production basis all year round. Discounting T2 milk well below cost and its intrinsic value is just rubbing salt into an already festering wound.

So the reality for Australian farmers that are servicing the domestic consumer market is that they either need to cop a huge penalty for producing surplus seasonal milk, or move to flat production with a tier one milk price that is inadequate to support this production system.

In the southeast of Australia ( Victoria and Tasmania ) farmers at least have a choice. They can choose to supply an export ingredient processor where they have half a chance of matching the milk price to the lower cost of a seasonal pasture based production system.

What choice do farmers in the northern half of NSW and Qld have? Ship their milk south? Sell milk at the local farmers market? We don’t think so. The choice seems to be: accept this milk payment system or get out of milk production. From the recent reduction in milk supply it looks like the second option has been a popular choice.

This has been a year full of contradiction and irony for the Australian dairy industry. “Down Down Down” has been the catch cry from the supermarkets. In association with this has been the supermarkets call of “Me Me Me” when it comes to allocation of shelf space to product brands. “No No No” has been the consumer cry regarding the inclusion of permeate in milk – with the effect that removal has increased the cost of fresh milk production. “Down Down Down” has been the message to farmers on milk price. “Up Up Up” has been the cost direction for the purchased feed that is so essential for a flat domestic milk supply.

Just about the only thing that makes sense at the moment is “Out Out Out” which has been the farmer response in those regions where there is nowhere to go with this unsustainable economic equation. It looks like Lion may have come to the same conclusion. The last word goes to outgoing Chief Executive Rob Murray:

“We don’t make any money [on milk],’’ Mr Murray said. ‘‘The simple truth of that is nobody is making money and you can’t make money if [consumers] buy milk at $1 a litre, it physically can’t be done.’’

Mr Murray described Lion’s dairy division as a “charity”, saying that “in fact a lot of charities do better”.

The dairy industry sings for its supper

Back to me

If Lion think they are a charity where does that leave the farmers supplying fresh milk in this country?.

On dole queues?. Not good enough Coles. Its time to take responsibility. When you pay peanuts you get monkeys and farmers aren’t stupid and they are voting with their feet big-time . And where does that leave consumers? Milk from China?