Roma Britnell: Failing to pay farmers a fair milk price sets dairy processors on risky path

Dairy processors must lift their prices or risk forcing farmers to walk off the land – and their stakeholders won’t thank them for that, writes MP Roma Britnell.

Under threat: More dairy farmers may quit the industry, Roma Britnell warns. File picture: Andy Rogers

DAIRY processors are being shortsighted and putting their own long-term viability at risk with their current farmgate prices.

Failing to pay farmers a fair price for their milk that reflects the strong prices the international market is now offering is putting the processors’ investment in stainless steel at risk and shareholders won’t thank them in the long run.

Last week Bega announced its first step-up for the southern region, but that price is still nowhere near reflective of the global prices being paid for dairy products.

Processors need to find the sweet spot, where farmers are getting a fair price for their milk and shareholders are happy – right now they are a long way off.

Liberal MP Roma Britnell. Picture: AAP

With the absence of co-operatives, there’s no leveller to reflect the market. Under law the processors’ obligations is to work in the best interests of their shareholders.

If processors continue to miss that sweet spot – where both the shareholders are happy and farmers are being paid fairly, especially when international prices are high – farmers will walk away from the land, reducing processors’ supply and putting their ability to meet the obligations to shareholders at risk.

The price cycle has highs and lows, often more lows than highs. Farmers are adept at riding that wave, but if they don’t have the opportunity to reap the benefits of the highs the model becomes unstainable.

If processors continue to ignore the needs of farmers we will have a situation where more dairy farmers leave the industry.

Margins are already thin and continue to get thinner thanks to a range of factors including government policy settings which I have written about previously.

When farmers walk away, that’s bad news not only for processors and their shareholders, but also the community who gain a huge amount of benefits from farming that aren’t recognised.

The pandemic highlighted the importance of being able to manufacture products we needed locally and were in demand across the world – we cannot afford to lose the bargaining power onshore food manufacturing provides.

Food is in global demand. If we lose onshore manufacturing, we are immediately on the backfoot, we become reliant on others rather than others relying on us. Food manufacturing provides us with a powerful bargaining tool.

Processors would be foolish not to consider that shareholders will eventually be the losers if they continue to compromise a farmer’s ability to do their job for a fair price.

● Roma Britnell is the state member for South-West Coast

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