Gippsland Dairy Industry


Eastern Victoria


Wednesday, 23 August 2017

Ms SHING (Eastern Victoria) — I rise today to speak on Mr Purcell’s motion, and at the outset I applaud him for his commitment to addressing some of the issues which have really cut to the heart of rural and regional communities around the state for many years now. At the very essence of what we are dealing with in relation to policy challenges, economic drivers and support for market led incentives to ease the challenge of rapid changes to commodities is the uncertainty that can lead to an enormous amount of stress, pressure, frustration and anxiety for people who live and work in our farming communities and who make the most phenomenal contribution, not just to our state’s coffers but to the reputation we enjoy in Victoria for producing some of the world’s very best primary produce. In Mr Purcell’s area obviously there is a huge demand for the niche product which is developed there. Also, no doubt we will hear from other speakers on the premium product that comes from the north of the state.

In Gippsland, the area from which I hail, I am unashamedly biased on the product that comes from that part of the world. To my mind we have some of the best grazing country and some of the most formidable genetic lines for dairy produce. In this sense it means that our output is pretty magnificent and our product quality is consistently high.
What we also know is that the primary production of milk solids and protein has been at the mercy of intense fluctuations in value over the years, often with little or no notice. In addressing the motion from Mr Purcell it is worth noting that this volatility goes right across this sector of agricultural production. In recent times we have seen enormous fluctuations in pricing as it relates to lamb and pork. We know that the seasonality of produce can mean a boom or bust response for farmers in that sector. We have also seen huge peaks and then troughs in beef prices due to changes in domestic and international markets.

Dairy is one of those markets which has been, alongside a number of others, really at the mercy of market forces, and that has occurred, to the minds of many who farm, in a very unfair way. It has ultimately created enormous pressure on and stress to farmers. We have seen from the milk price drop that occurred in 2016 and the recent posting of a $370 million loss from Murray Goulburn in the 2017 financial year that it is taking a long time for our dairy farmers to begin the process of recovery. I know, having heard from many farmers and from being on farm myself, that many farmers in fact had to cull really heavily. They relied on neighbours to put food on their table when the milk cheques stopped. They experienced enormous pressure and mental fatigue associated with the sudden announcement of enormous debts that they would have to repay.

This had a ripple effect within local communities. It required extensive talks with banks around whether refinancing was possible. For some farmers this was able to be done. For others arrangements around financial hardship for the repayment of loans, including in contract arrangements, were able to be negotiated. But for others some really significant decisions had to be taken around the choices that farmers were faced with — for example, to service machinery on the one hand or to get a vet out to attend to a sick animal on the other; to put food on the table on the one hand or pay the power bill in any particular month. It has been a really hard time for many farming families throughout the state. Today I think it is incumbent upon every level of government to provide assistance and support wherever and however it possibly can to ease that burden and also to ensure that farming families and communities that rely upon discretionary spends as a consequence of farming yields get that support and know that they are not alone.

Farming can be a very isolated activity. We all know that. We also know that that is entirely appropriate and something that is one of the best parts about farming. However, it can also lead to intense isolation, and that can manifest in very serious depression and anxiety. It can result in people not being able to access services, including health services, that they need to keep their wellbeing ticking along and to make sure that they can weather the storms — storms that this sector and this industry have seen in great volume since the milk price drop and will no doubt see again in future fluctuations.

The key thing around support for the industry is that we learn from what has occurred as a result of market volatility. There needs to be continuous improvement to on the one hand buffer our farming communities from the worst of those troughs — the worst of that uncertainty — and on the other hand enable our farming communities and the agricultural sector more broadly to build as much fat around their autonomy in contractual negotiations and access to market, whether domestic or international. There needs to be security so that farmers are able to move, for example, as new farmers often do, from a hobby farm or a shared farm to building equity in a business, so that over time a level of fat and reserve is built up to assist farmers when and as they come across those difficult times.

It is crucial that we take a very holistic approach to this policy challenge. I note that in his initial remarks on the motion Mr Purcell referred to a number of initiatives that had been created and funded in the course of the state government’s response to the milk price drop and to Murray Goulburn’s retrospective adjustment to the baseline prices. Initiatives including Look Over the Farm Gate, programs dealing with farmers who have fallen on hard times, the National Centre for Farmer Health, programs to provide greater financial literacy around options and opportunities for refinancing and better training of field officers to assist have had a benefit. We know this because of the uptake that has occurred. We know that we need to keep the work going. We know that it is integral to a strong, vibrant and healthy agricultural sector, particularly in dairy, that this effort continues to be funded over time.
Providing assistance for tanker drivers and others to receive mental health first aid training has also been a really big part of this work. To that end the work that has occurred through organisations such as food relief and Gippsland Farmer Relief Incorporated has been nothing short of astounding. To see that you only need to look at their online community and the outreach that occurs, even at a very general community level.

Being able to share information is one of the greatest parts of alleviating the stress on farmers. They are often required to make very difficult decisions about how best to keep their business afloat — and often their family fed — and ensure people get what they need, whether it is their children’s educational needs being met or, as I mentioned earlier, machinery being serviced or vets being called to come on farm when and as sick animals need it.

The outcomes that we need to drive need to be able to weather the storms, not just of recovering from this price drop but into the long term. To my mind they also need to translate effectively across sectors and across industries within agriculture so that we can be better and more resilient in providing support to our farming communities.
In the course of dealing with the milk price drop and understanding the impact upon farming families and communities we note that a number of inquiries were initiated. At a state government level there was a package provided immediately to give assistance to farmers who were affected. In addition the commonwealth government has taken steps to understand, through an Australian Competition and Consumer Commission (ACCC) process and inquiry, how it is that the system and the structure of pricing and contract delivers or does not deliver security for farmers in primary production.

In this regard there has been an awful lot of community input, as there should be. Amongst the submissions that were provided to the ACCC inquiry we have seen calls for a change to the model of Australian milk pricing to in fact move away from the current system and have a system that involves two core contractual structures, including a foundation processor agreement whereby a farmer would sign an agreement with one foundation processor, who would be responsible for collection, quality testing and delivery of milk from the specified farms to one of its factories based on an agreed table of fees and charges. This element of the agreement would be something akin to the cane supply agreements that are signed between sugarcane farmers and sugar mill operators as well as warehousing agreements between grain farmers and storage operators. Understanding the portability of measures that could apply in the dairy industry that are already in place in sugarcane production and in grain is an important measure that we should be taking on board.
Under the proposed model that was put to the ACCC the foundation processor would also be the buyer of any standard milk price volumes produced by the farmer, with standard milk price volumes being those collected by the foundation processor from the farmer in excess of any fixed volume contracts for that farmer. That means that the standard milk price would remain a floating volume, a floating price milk market mechanism as it is today.

The second component of the proposed system that has been put to the ACCC inquiry would refer to fixed volume contracts, whereby the farmer would have the right to sell milk under fixed volume contracts to both the foundation processor and to other buyers. This is an important step as far as understanding the privity of contract that operates on the ground within our dairy sector at the moment and the impact that it has had on fixed price and exclusivity of supply that occurred in and around the milk price drop of 2016. Under these fixed price volumes the foundation processor, under the proposed model put to the ACCC inquiry, would be obliged to deliver milk to other buyers whenever the farmer contracts with them, earning a fee in the process. This system is similar to the grower economic interest transfer system seen in the sugar industry. Again we learn from what has worked in other sectors and industries around production and supply. In this situation, the farmer would only be able to commit a certain percentage of forecast volumes per month to fixed volume contracts to manage production risk — for example, in the situation of not having enough milk to cover their fixed volume contract obligations.

To look at other sectors and commodities in which this has operated, in sugar the limit is set at 65 per cent, which means that 35 per cent of forecast production for each farmer is expected to flow to a floating price or a floating volume price mechanism. Deliveries made by the farmer to their foundation processor in excess of fixed volume contracts would be the standard milk price volumes that I referred to in my opening remarks about this potentially new way forward to provide more certainty and more autonomy to primary producers in this sector.
We do have a level of innovation that is occurring, as the house has just heard from my remarks about the proposed system, that might be considered at a federal level to alleviate this pressure on farmers. As part of a tripartite measure in addressing the pressures and the challenges for our farming communities, this would need to work hand in glove with state based initiatives. Looking at these state based initiatives, we need to make sure that the value of our agricultural production continues to rise overall — and in 2015–16 this value was $13 billion. We also need to make sure that Victoria occupies the largest possible market share of agricultural production by value. In 2015–16 that was 23 per cent, and we accounted for only 3 per cent of the landmass. In translating production and output to real terms we are punching well above our weight.

We need to make sure that that stays the case. We need to make sure that we avail ourselves of the best technology, the best measures to encourage and improve efficiency in primary production and the best measures to encourage and preserve efficiency and water security. We need to keep these issues at the forefront of the minds of any government — whether it is the Andrews Labor government or any future government — and continue the work with any federal government so that we avoid duplication wherever possible. This is so that funding sources can be directed to enable the best possible benefit to the industry and to make sure that we can rebuild and sustain trust with our primary producers and look after the interests of those who are working the land.

We have got a huge food and fibre manufacturing base in Victoria that exports around $11.9 billion of valuable production — or at least it did in the 2015–16 financial year. Understanding that we have got around 30 000 businesses in the state that employ 190 000 Victorians, mostly in regional Victoria, we can see that in economic terms, as well as in social terms and from the perspective of regional growth and development, this is an incredibly important part of the state’s growth prosperity and its need for investment.
In 2015–16 Victoria accounted for 81 per cent of Australia’s dairy exports. In this regard Mr Purcell’s motion is well placed. We had 20 per cent of meat exports, 55 per cent of animal fibre and wool, 48 per cent of horticultural exports and 39 per cent of prepared food exports. We have a huge global market. Obviously with populations increasing we look at — again quoting the rumour mill — people in China being prepared to pay up to $12 per litre for fresh milk with the powdered milk industry going through the roof. We need to make sure that we can capitalise on that market share, we can grow it consistently and we continue the reputation we have for clean and green produce. We also need to make sure that the ancillary requirements of supporting this industry, such as the large water volumes required for dairy and also for processing, are supported into the future.

Making sure that we look at what is happening in other jurisdictions is another really crucial part of the motion, which in fact was well placed and was well put by Mr Purcell today. Ensuring that we have a series of programs that proactively encourage industry and business to thrive and to flourish will not just make sure that we are in a position to meet our own needs as a state as our population grows — and we are looking at what it is estimated to be an additional 4.6 million people in Victoria 2050 — but will also make sure that we continue to grow the volume which is exported, either to other parts of Australia, particularly as climate change makes its impact and as dairying opportunities and viable land areas change and fluctuate, but also internationally. We are continuing to see global population growth, and this should be seen as an opportunity that all governments of all levels should leap at in a proactive and responsible way.

In providing for drought and dairy support in 2016 the Andrews government provided over $38 million across two years for assistance to farmers who were affected by drought and dairy farmers affected by low milk prices in the form of business management support, financial counselling, mental health services and community events. There were also extensive outreach and extension services to over 5000 farmers, encompassing a really wide range of activities designed to improve production and sustainability and also looking to harness the momentum around technically oriented discussions that take place in farming communities and families increasingly, which is as much a part of modern farming as having a herd and a functioning dairy. These activities included technically oriented discussion groups, on farm demonstrations, accredited training, workshops and seminars and recognising the way that dairy farming has changed and evolved when you compare one farm with another.
We are looking in West Gippsland at a farm which is all but ready to go off the grid entirely. We are seeing increasing reliance on robotics. We need to make sure that correspondingly power supplies and generation are not vulnerable and can indeed be maintained in the event of outages, and in Gippsland we see a lot of wind and a lot of inclement weather particularly in winter and spring. Whilst it brings rain, and that is fantastic for feed production, it can also make for some very challenging times as far as primary production in dairy is concerned.
Animal welfare is another part of the work that we are doing. In September 2016 a draft action plan was launched for improving the welfare of animals in Victoria, with a final action plan which is going to be released soon, to be Victoria’s first ever strategic plan for improving animal welfare, along with the biosecurity measures which the Minister for Agriculture, Ms Pulford, has talked about at length around sheep and goat electronic identification, as well as breeding and genomics initiatives.

This is again evidence of the importance of innovating in farming and making sure that we continue to support farmers to get the most out of their land, to get the most out of their stock and to get the necessary support to grow their businesses through a reduction wherever possible in red tape, through support on farm and in community when and as it is needed for mental health and wellbeing, and also the broader initiatives around water grid and other security for energy that is as much about successful farming as anything else.

Having had work from a range of experts within Agriculture Victoria we have made sure that we are at the cutting edge of technological development, whether it is in genomics, whether it is in making sure we are capitalising on biodiversity and opportunities to enhance market share or whether it is about improving forages and the way in which stock is managed across different options throughout the year, and we see that on the ground.
There are many farmers who do this very, very successfully already, and in this regard — and I want to single him out, but I note that there are hundreds of others across the #dairylove page on Facebook — Paul Kent of Woolamai is one such farmer who takes a very scientific approach to developing diploid and tetraploid forages for his cows and to making sure that he has a very specific understanding of the technical elements of farming and the way in which pathogens are a necessary part of the building blocks for successful farming. So right down to that cellular level, in making sure that he has a good grounding in the way in which his farm works, he is able to make the most of the soil that exists in the South Gippsland area, to make the most of the weather as it changes throughout the year and to make the most of technology in relation to when and how he plants, when and how he calves and what he does to build the genomics within his particular herd.
Paul Cocksedge of Leongatha is another farmer who has taken the genetic elements of stock selection to a really fantastic level. We see this expertise in our farming communities everywhere. We all know of farmers in dairy — at least those of us who live and work in regional Victoria and are proud to call regional Victoria home — who have specific expertise, whether it is veterinary expertise, whether it is stock selection, whether it is the way in which a herd is developed over time, or whether it is in land management or stock management, or indeed in biodiversity.
These are the sorts of things which need to form part of the conversation, not just around what the federal government is doing with its ACCC review, not just around what the state government is doing with the $38 million that was provided after the milk price drop in 2016 but also within our communities — and being able to share that information is crucial.

To add another part to this motion, however, it is also really crucial that we acknowledge and respect the role of women farmers in our industry. All too often we see that women who farm describe themselves as being farmers’ wives whilst retaining an enormous amount of corporate knowledge about how the business of farming works. They might refer to themselves as ‘just doing the books’, but in fact just about nothing could be further from the truth. These are women who have a deep understanding of the way their land operates, what the challenges are, when and how previous problems have been addressed successfully and where to go for help. Women farmers are resourceful, innovative and also make the most of the networks, including those that can be established on social media and in their communities, to get the best that they can, not just from their own herds and not just from their own businesses on farm but also for their communities.

These are really important things to recognise and remember in looking at the work that can be done to assist and enhance our farming communities, moving away from this invisible farmer model, where women have all too often stood behind a male leader within a farming family and simply done the work in the background. We have come a long way, and any and all support that can be offered from the federal government as well as through initiatives such as the Invisible Farmer project and the work that the ABC and Museum Victoria have done, is in fact really welcome and a big part of making sure that we are making the most of every person who contributes to farming on the ground.

Our standing internationally and nationally has been enhanced through the work that Agriculture Victoria has done to invest time and resources into establishing really strong research links with private and public agencies across Victoria and also across the world. Our agricultural research and development and also education are part of a national agricultural innovation system that is based on collaboration. In this regard the regional summits and the work that agribusiness does throughout Victoria, from those very people who know their communities best and who know the expertise required for successful farming, has been a big part of beginning and sustaining that conversation over time.

Biosecurity is another area where we have thrived. Australia has, due to our very natural quarantining arrangements as a very large island, got biosecurity measures that warrant keen protection over time. Agriculture Victoria is working really closely with the federal government, as I referred to earlier, as well as with other state and territory governments to support through their agencies the detection and management of outbreaks of pests and diseases.

Supporting the verification and certification activities for agriculture and food products is a big part of this, as is making sure that as the leading milk producer Victoria, sitting at 65 per cent of total production, can stay that way and keep its product at the very top of international wish lists in relation to contracts for our goods. Making sure that we have dairy research that underpins this work is another really important part of how we can support our farmers. As an export focused industry the dairy industry has also been required to meet the challenge of keeping production costs low. We have done well over a succession of governments to be second only to New Zealand in relation to the cost of production.
Our systems are unique here because of the relative advantage of having access to pasture for grazing and access to competitively priced cereal grains. I referred in my opening remarks to making sure that we have measures in place to weather the volatility, and wherever possible to smooth it, to provide greater autonomy to farmers around the way in which prices are set — and I have taken us through a couple of the proposals put to the ACCC inquiry around changes to current milk pricing arrangements that would deliver improvement to farmers — and also making sure that government does its part in the heavy lifting, funding, resourcing and engagement in areas such as research and development, biosecurity and the embracing of technology.
When we look around the world — and Mr Purcell referred to this in his comments — we do see an increasing reliance on automation, an increasing reliance on technology and changes to production output as individual countries choose to go their own way in how to maximise the primary produce that they have within their borders. We need to make sure we do the same, and the milk industry and dairy are too important not to invest in to the extent necessary to have this happen.

We have got a greater diversity of dairy systems, as I referred to. We have got pasture only on the one hand, and then on the other side of the spectrum we go right through to feedlot. The key difference is that in Australia less than 1 per cent of dairy farms are fully feedlot. They are often a hybrid or mosaic system, in contrast with the US and Europe, where dairy feedlots are common. Anyone who is part of any of the extensive range of online dairying and dairying support groups will see that often it is as much about inclement weather and dietary control as anything else but that there is a much greater reliance on feedlot systems in other jurisdictions. However, we do have some really fantastic opportunities through our climate and through the availability of forage and pasture to have a much greater opportunity for our livestock to roam around and to therefore develop into premium product as a result.

Having that flexibility, though, for farmers in their farming systems is a really important part of being able to choose to feed higher amounts of supplements. We know that, again, to get back to the science of what makes for great dairy, what makes for great beef or what makes for great lamb, pork, cereal, sugar et cetera, making sure we understand the science that underpins good farming is as much a part of successful farming as anything else. Feeding higher supplements to grazing cows is an opportunity that exists compared with other pasture grazed dairy industries, and that would also depend upon the input costs and milk price as well.
There is a lot of work going on around the future focus of Agriculture Victoria, and we note that there is digital technology and infrastructure — again, a very common topic of discussion whenever the minister has been on farm and whenever Agriculture Victoria has done round tables. Again, when I have been on farms some of the technology I have seen in place will in fact blow your hair back. It is remarkable what has been done to achieve automation in some of the most far flung places in the state and the extent to which people have adapted to this and made it work in favour of the needs of their own herds and their own stock levels over time.

We must also make sure that we have got skills in agriculture as well. Mr Purcell referred to farming scholarships and the difficulties and challenges associated with getting and keeping young people on the land. Volatility, like the milk price drop in 2016, does not help. In fact it was an enormous disincentive for people who were either sharefarming or thinking about getting into farming when they realised that without very large amounts of equity and without a very large support base it would be nigh on impossible to farm in a financially viable way until prices stabilised and until people could go in with a fair buffer between them and a zero on their milk cheques.

It is something that requires assistance, a skills base and development as well as experience with mentors who can provide the sort of wisdom that is often gained through 20 or 30 years of farming and across a number of different generations. That is really important around building that confidence, because we need to make sure that our farming communities are invigorated and well resourced, have access to good current information and can tap into a network for assistance, programs and services when and as they need them.

It is also about making sure that we can deal with intensification in our horticultural industries. To look at the portability of things and the lessons that are there to be learned after the price drop, we do look at horticulture as well, and intensification is a big part of increasing our market share. Whether it is micro herbs, tomatoes, capsicums, zucchini or cereal, there are opportunities that exist here for us within our environment of optimal biosecurity to really take a greater share of the market and to enhance the profitability for the farmers as well, making sure in that regard that we have access for them to freight their stock either internationally or to a good solid road network that can get goods to market or to port. That is really important too.

On farm energy action plans are another way that, through the ripple effect that Mr Purcell referred to in his contribution, we can take care of farmers to a better extent. Reducing the amount of energy required to run a dairy — again, an energy intensive practice, as it is a water intensive practice — is a big part of this because the more money we can help farmers to save, the more money they will have to put back in their operation to either buy machinery or further invest in their land. It is about prosperity for the sector, as is making sure that prominence is a big part of this too and that the branding we have through export guides and arrangements to make the most of what we are producing so that we can compete with New Zealand Pure Dairy and so that we can compete with the way in which other jurisdictions have in fact done rather well in the way they market their product. A better turnover of Australian product through grouping, through provenance and through traceability means is a big part of making sure that we can support the industry at the consumption end of the market.
It has, though, in closing — as people would no doubt be pleased to hear — been a really tough time for our dairy farmers and for the sector in the same way that it has been a tough time for primary producers across other sectors and in the production of other commodities. In this regard I do not think that any government should ever lose sight of the fact that at the end of a milk cheque that has a zero on it and nothing else there is a family. And at the end of that family with that milk cheque with a zero is a town, and there are businesses associated with that town and there are people and families associated with those businesses.

It is all too easy for consumers to adopt an out of sight, out of mind approach to where and how they obtain their dairy products. The localised effort to buy branded full price dairy products after the milk price drop occurred in 2016 was pretty magnificent. That continues to apply across the board. Pleasingly, it continues to be the case that branded full price dairy will be sold out, particularly in the smaller regional and rural supermarkets, simply because people are making the choice to invest that little bit more after we saw the $1 per litre milk price wars. People understand that buying a litre of milk for $1 means we are permitting, through our consumption, a system that gouges primary producers in dairy, that gouges those farmers and that makes it difficult for them, their families and their communities to survive and to thrive.

Not everyone has the means to pay full price for dairy, and that is understood. There are families for whom generic branded milk, cheese, yoghurt, butter and ice cream is the only option that they have; that is well understood. In many cases the farmers themselves struggle to do anything but pay for generic product or to take from the vat themselves — many farmers will tell you that in fact the product from the vat itself is better than anything they might get from the supermarket fridge.

We need to make sure that this effort continues around valuing the product as it is produced at a very local level. Educating consumers to understand where our product comes from and the sacrifices and the work involved in bringing it to the market is as much a part of providing support to our dairy farmers, in the terms of Mr Purcell’s motion, as any other component of the broader industry support and response that I have referred to in the course of my speech.

The government supports the terms of Mr Purcell’s motion. As a representative from the Gippsland area I applaud Mr Purcell for bringing this motion to the house. I hope that the work will go on in the best way possible and in good faith to make sure that all of our dairy farming communities and families are supported, not just now as we come out of the milk price drop — and it will take a couple more years — but into the future. I look forward to seeing our farmers go from strength to strength, and I look forward to continuing to support the dairy industry, not just in Gippsland but across Victoria.