Coalition Senators are fierce supporters of the Australian dairy industry, and recognise the tireless work of our dairy farmers. Coalition Senators greatly appreciate the contributions made by farmers, stakeholders and advocacy groups and their participation in this inquiry.
Government members believe industry is best placed to manage the activities of Recommendations 4, 6 and 10, specifically Dairy Australia, as it is supported by farmer levies and matching payments from the Commonwealth Government for research and development activities.
Amended Recommendation 4
The committee recommends that Dairy Australia investigates price discrepancies between exclusive and non-exclusive milk supply contracts, processors circumventing collective bargaining groups, and the fairness of pricing for multi-year contracts.
Amended Recommendation 6
The committee recommends that Dairy Australia produces and distributes information for farmers on the bargaining advantages afforded by the code of conduct to assist in their negotiations with processors.
Amended Recommendation 10
The committee recommends that Dairy Australia maintains a single authoritative measure of the cost of production of milk for the eight regional milk districts.
In relation to recommendation 13, Government members of the committee note statements from Australian Dairy Farmers that a minimum price set above the market clearing price would likely diminish incentives to innovate and improve productivity across the supply chain, and thereby reduce profitability and international competitiveness.
Additionally, Government members note that despite the extensive inquiry conducted by the ACCC into the dairy industry, with its final report published April 2018, no recommendation was made regarding the implementation of a mandatory minimum farm gate price for milk at a national level, or by individual dairy region.
Government members are of the view that farmers in each dairy region should be paid a fair price by processors and retailers. The introduction of the Mandatory Dairy Code of Conduct, transparency of pricing and other measurers have provided clearer signals to the market in this regard. Additionally, previous ACCC investigations have occurred and not recommended the reintroduction of minimum milk prices.
In relation to recommendation 14, Government members believe it is only fair that retailers play their part in giving dairy farmers a leg up. The behaviour of the supermarkets, and particularly their introduction of one dollar per litre milk, have at times been egregious and of great harm to the industry.
Government Senators note that in May 2020 the Minister for Agriculture, David Littleproud, called on supermarkets to implement a voluntary levy across the full dairy cabinet and branded fresh milk, with the intent of supporting dairy farmers until the full benefits of the Mandatory Dairy Code of Conduct take effect and further reforms can be considered
While Government members are supportive of consultation between the government and industry stakeholders to investigate a retail sales levy that would increase returns to farmers, Government members would not support a mandatory retail levy.
A mandatory levy would be direct intervention, which would disadvantage the industry overall by slowing investment in innovation, distort input costs and disadvantage other agricultural commodities, and potentially encourage milk production in lower cost dairy regions to the disadvantage of higher cost regions such as Queensland—thereby pushing farmers from higher cost regions out of the industry.
A voluntary levy is the best option to support dairy farmers as it allows the market to respond, with consumers making purchasing decisions that benefit farmers.
Supermarkets could implement a voluntary levy quickly, distributing the benefits to farmers more rapidly than a government-introduced levy. Retailer-led approaches wouldn’t create the same level of market distortions that government mandated pricing can create.
Government members acknowledge the impact of subsequent years of drought on the dairy industry, followed by bushfires and then COVID-19. While conditions are improving for the industry, this inquiry has clearly indicated that further improvements are required. Submissions and evidence given to the Committee have made it clear that Australian dairy farmers don’t want charity – they just want to play on an even playing field.
Government members remain committed to supporting the very important, critical dairy industry.
Senator Susan McDonald
Senator Gerard Rennick