Talking Point: Dairy farmers want a fair go on milk prices

JAN DAVIS: Restrospective cuts by processors are causing upheaval in a key sector.

Farmers are locked into supplying processors because they all offer pretty much the same terms. Picture: ZOE PHILLIPS

The right to a fair go is the thing most Australians put at the top of their list when it comes to values. Yet, increasingly, the politics of envy and fear are replacing our sense of fair play.

I’ve been thinking about this after announcements by Australia’s two biggest dairy processors, Murray Goulburn and Fonterra, that they would cut the price paid to farmers for their milk. Cuts of any sort are bad enough, but these are retrospective. Farmers are expected to pay back money they were paid for product that has been sold.

Murray Goulburn intends clawing the money back from future payments over three years, with interest. Fonterra also offered loans that will have to be repaid after 2018.

I had coffee with a colleague a few days ago, and he was bemoaning the reactions following the ABC’s Q&A from people he referred to as heartless. I’ll leave it to others to pick over the entrails of that issue. In the next breath, he condemned farmers for whingeing about the situation in the dairy industry, and said he could not see why they expect special treatment.

And fair enough, too, if farmers could count on minimum wage standards and all the safeguards other workers have. Bring it on. Not too many workers have all their life savings invested in their job, and not too many live where they work.

Australian farmers do not have subsidies or financial supports like farmers in other countries. They survive in global markets competing against Third World producers, while maintaining First World regulations and cost structures.

If they don’t like the price they’re being offered, my colleague went on to say, they should withhold supply or stop dairying and do something else.

That’s not going to work. Farmers are locked into supplying processors because they all offer pretty much the same terms. Milk is perishable and cows have to be fed and milked each day. If farmers did go on strike, they’d be left with the same costs and no income. Most milk is processed into dairy products sold overseas. In the first instance, processors would swap to imported product, then, eventually, move offshore. We’d be left with fewer fresh products, higher prices and a lot of imported powders and other processed products.

Not too many workers have all their life savings invested in their job, and not too many live where they work.

After widespread outrage over the sudden drop in payment, Fonterra backed down on Monday and agreed to restore part of the price cut. At time of writing, there had been no revision by Murray Goulburn. While the partial about-face on payments is welcome, it has added to frustration as some farmers dried off or sold cows to try to manage their situations. This has resulted from a lack of honesty and transparency from people the farmers ought to have been able to trust.

These decisions have ramifications. The Australian Securities and Investment Commission and Australian Competition and Consumer Commission are investigating. A class-action lawsuit was filed in Victoria’s Supreme Court claiming Murray Goulburn allegedly misled investors ahead of its float last year.

People find it difficult to understand how farmers can get a price for a product and then the customer who has paid that price can come back months later and say: “I’m sorry, we’ve overpaid you, and we’re going to hold back that money out of what we’ll pay you in future.” So do I.

It costs $x to produce an item. You should be able to expect to be reimbursed at sale for that cost, which includes your wage to produce the item. The average wage earner has that right when they sell their labour. Any other business has that right when they sell their products. Why shouldn’t farmers have the same rights?

It seems hypocritical for armchair critics to be lecturing farmers when they do not know the facts, and they have a full stomach.

What has happened to our sense of fair play?

Jan Davis is an agribusiness consultant and former CEO of the Tasmanian Farmers and Graziers Association.