Sid Sidebottom (Braddon, Australian Labor Party) Share this | Hansard source

I thank the member for Murray, with whom I share an identical birth date, for raising issues affecting an important Australian industry, particularly in my region, which is one of the most productive dairy districts not just in Tasmania but in the country. In Tasmania dairy represents 24 per cent of the value of farm production and underpins significant downstream processing. Tasmania’s dairy industry supports some 460 farms, producing over 640 million litres annually, and is a vital regional employer, directly employing 2,200 people on-farm and a further 675 in the processing sector. Tasmania is the third biggest dairying state, behind New South Wales and Victoria.

In the last five years production has grown by about 20 per cent. Indeed, it is a growing industry not just in terms of output but in terms of capital investment, as some 25 per cent of farms undertook some form of capital investment in 2007-08. About eight per cent of Tasmania’s milk production is consumed as drinking milk. The balance is manufactured by dairy companies such as Fontera, National Foods and Cadbury into products such as cheese, milk powder, butter and confectionery. The gross value of Tasmanian dairy products after manufacturing is nearly $600 million. In the year 2007-08 this was worth $332 million at the farm gate but, as a stark indicator of the problems facing our farmers, this will drop to less than $300 million this year.

This drop has been forced by a number of factors, including seasonal conditions and a falling international milk price. In my part of the world a huge rainfall has made it difficult for some farmers just to get the herd to dairy. In January Fontera announced a cut of about 32 per cent to its suppliers, which I am told is worth between $50,000 and $80,000 to the bottom line of a typical supplier. Fontera is by far the largest player in the Tasmanian industry and has been hit by the global financial crisis and its impact on world markets, where much of its produce is traded. I note that some optimism remains in the sector and a few indicators are starting to show light at the end of the international price tunnel.

In more recent times suppliers of whole milk in my state have been hit particularly hard by a cut to prices from dairy company National Foods. The reason for this cut in prices has been the subject of much debate and comment, particularly in my state. It led me to write to National Foods to seek their perspective on what it is a complex situation. In direct correspondence with National Foods on this matter the company tells me its price is aimed at sustaining the company and farmers through what is a difficult time for all with reduced prices across the board.

While I am no authority on pricing, what I would seek from both National Foods and farmers is an arrangement where, in effect, they share equally both the gain and the pain. When prices are strong and a market buoyant, then both parties should be rewarded. But, when times are tough, then a company should be staring down a barrel just as much as its suppliers. National Foods says it was forced to pay a competitive price to its whole milk suppliers two years ago when the processing milk price was high. Further, it argues, while the farm gate price rose by more than 50 per cent, the supermarket price for branded milk rose by about 10 per cent and private label pricing rose even less and has since dropped. During this time of price scrutiny, the major supermarket chains must also look closely at their responsibilities. They have a major say over the volume of milk that flows to consumers and the price that they pay. They must consider the big picture and the future of the industry as a whole, and not be completely price driven.

We are at a crossroads for some dairy farmers, and the risk to the industry cannot be understated. On the price front, I hope that the current inquiries by the Senate will look more closely at what influences the price milk suppliers of any type receive. I am concerned however that the lack of competition in Tasmania may lend itself to greater market variability when compared with other states. When massive price distortions occur and long-term contracts are subsequently locked in, there is a real risk that producers will be forced out of the industry—and I do not need to remind members what this will mean to the future viability of the local industry in Tasmania.

Given the difficulties facing many of my local farmers, farmers in financial hardship can access free and impartial financial advice through the Rural Financial Counselling Service, co-funded by the Australian and Tasmanian governments, and these services are located throughout Tasmania. We need to strive to find the answers to sustain both our farmers and the companies that they supply so that the industry can survive to a time when prices are again strong and all can reap the benefits.

See this speech in context