Murray Goulburn boss calls for better policy for food manufacturers

FARMERS will never get a bigger share of the food industry's profits unless government policy improves, Murray Goulburn warned.

MURRAY Goulburn chief executive Gary Helou has called on governments to dramatically improve their engagement with the food manufacturing sector to help farmers capture a bigger share of the profits being generated in the industry.

''There has been less than adequate engagement between government and business to forge a way in food manufacturing areas where Australia can win,” he told The Australian's Global Food Forum in Melbourne today.

''The New Zealand example is a classic example of a government picking a winning industry, backing it and making it world class. We haven't had that in Australia.

Mr Helou stressed he was not seeking goverment subsidies but rather ''good policy that promotes investment and bilateral trade agreements in interesting markets such as China”.

He said there were three big reasons why farmers had not been able to capture a bigger share of the profits in the dairy industry.

The first was that the the downstream and marketing parts of the industry were now all in the hands of multi-nationals.

''I cant point to one Australian company that has managed to grab hold of a regional or global footprint that allows them to capture the profits and redistribute it back to the farmer in terms of price or a dividend,'' Mr Helou said.

He also said Australia had not historically kept up with world's best practice in supply chain management, nor connected with emerging markets of the future.

''Unfortunately, Australian-owned food companies have not made the footprint that others have made. That is causing us a lot of pain in terms of capturing the profit,'' he said.

Mr Helou’s comments come after Murray Goulburn revealed last week it would invest $120 million to build two new milk processing plants in New South Wales and Victoria to service a new 10-year Coles contract that begins in July next year

''We need to build the world's fastest most efficient plants (and) build them in Australia, Mr Helou said, adding that the new plant would have a fraction of the headcount its competitors had.

Dairy Australian managing director Ian Halliday cautioned that implications of the deal for others in the sector remained to be seen, but said: “If nothing else, this will provide certainty for a number of farmers because of the long term contracts.''

Mr Helou also said the farmer ownership model in the dairy sector ''seems to be a winning model.''
''We are borrowing heavily from global leaders in this space (like Fonterra in NZ),'' he said.

Murray Goulburn is seeking to become one of the top 20 dairy firms in the world, which would involve lifting annual revenue from $2.2 billion to $4 billion.

The co-operative said today that it had spent $5.5 million on boosting its stake in smaller, listed rival Warrnambool Cheese and Butter to 14.5 per cent, but denied that it planned to make a takeover bid.