2016 Dairy Crisis

Why Murray Goulburn’s price step-down is unfair

For all dairy farmers, the 2016 crash in milk prices is far worse than a market correction. It strikes at the heart of dairy farming and undermines the basis of farmer co-operatives.

There is rhythm to milking cows twice a day. It needs predictability, consistency and routine to make this perishable food.

The two things that dairy farmers fear most are, first, the milk truck doesn’t pick up the milk, and secondly, the milk cheque doesn’t come as expected. A fail in one or both of these things and trust with the milk company is broken.

So when Murray Goulburn (MG) announced a step down in price without warning, and backdated it to July 2015, it was felt as a fundamental breach of the ‘trust contract’ by their 2,600 farmers.

As price takers in food markets dominated by large buyers, farmers form co-operatives to realise economies of scale, share the costs, increase their bargaining power vis-à-vis the supermarkets and other buyers, and, in sectors like dairy, share in the potential added value from manufacturing and marketing.

At the same time, milk and dairy products are a globally-traded commodity, which means the prices Australian farmers receive are to a significant extent determined by global markets. With recent increases in dairy production in many countries, there is now a global over-supply of milk.

While this means that there is no simple answer to the current predicament of Australia’s dairy producers, it’s also the case that fairness requires that we take action to support our dairy farmers.

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“We can help support dairy farmers” says Goulburn Valley Food Co-op

The Goulburn Valley Food Cooperative has released a media statement committing to support dairy farmers impacted by the recent Murray Goulburn crisis:

The GV Food Co-operative advisory board has committed its energy and resources to finding ways of supporting dairy farmers to stay on their land. Heather Thorley from the GVFC Board says: “as a teacher in Kyabram, I am horrified by the impact that this savage drop in milk prices will have on many of my students and their families. This disaster is a direct result of the supermarket milk wars, and we are about to pay big time for that stupidity”.

“Responding to the crisis at both Fonterra and Murray Goulburn processors, the Co-op commits to support four concrete steps,” Graham Truran secretary to the advisory board explained. “We will work with all levels of the government, community and industry to:

  1. Arrange alternative processing plants for local milk
  2. Establish a fund for procuring that milk at a fair, sustainable price
  3. Create a steering committee of financial, welfare and legal advisors to provide pro- bono support to small dairy farmers
  4. Organise a method to make sales directly to the public.”

Read the full media release: Goulburn Valley Food Cooperative Media release 17 May 2016GVFC Media release 17 May 2016

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