Decades after surviving one of the industry’s most significant changes, Australian dairy farmers continue to evolve and reinvent their businesses to stay competitive.
Up until 2000, Australia’s dairy industry was regulated by state governments to ensure a year-round supply of drinking milk for consumers that met a set of standards, according to a 2001 review of the industry by the ACCC.
The regulations meant state governments controlled the drinking milk market, including volume and price, while the Commonwealth supported the farmgate price of ‘manufacturing milk’ used in bulk products like powdered milk.
Though each state differed slightly, local dairies sold their milk at a price set by the states, to local dairy processors.
Supermarket milk prices dropped
This was the period before the milk wars in the major supermarkets.
The push for deregulation was led by Victoria, which concluded its “farmgate pricing arrangements did not deliver a net public benefit”, according to the ACCC.
“Other state governments soon recognised that lower Victorian market milk prices and the dismantling of Victorian restrictions on interstate trade in drinking milk would render ineffective their own milk pricing arrangements,” the report says.
After that, supermarket prices for plain and low-fat milk dropped by an average of 22 cents between the June and December quarters in 2000, while consumer demand moved away from UHT-products and private label brands to generic brands and larger sizes.
On July 1, 2000, legislation governing sourcing and pricing of drinking milk was repealed and state milk authorities were wound up.
‘Meetings galore’ ahead of deregulation
Max Fehring, who was the president of the United Dairyfarmers of Victoria at the time of deregulation, said he recalled a heated discussion in the lead-up to deregulation during the 1990s.
“And rightly so, because there was a lot at stake for a lot of people,” Mr Fehring said.
“It meant a lot of money for some farmers.”
Mr Fehring said arrangements were agreed upon that compensated farmers for their quotas. However, the deal was not easy to strike.
“It was meetings galore, and there was protest on all sides,” he said.
“Some against, some wanting to deregulate [immediately] with no consultation, just let the market rip. Others wanted to negotiate an orderly transition.”
Mr Fehring said close to $2 billion was paid out to dairy farmers across Australia.
“The average varied from $245,000 in Queensland to about $135,000 here in Victoria. It all varied [based on] a farmer’s production,” he said.
Farmers could take a bulk payment, or have the payout split over eight years.
“People had the option of deciding how they invested in their business and how they went about their business thereafter,” Mr Fehring said.
A bittersweet view of dairy decline
Mary Valley farmer John Cochrane is painfully aware of the decline of the dairy industry in Queensland.
In recent years Mr Cochrane purchased the Kenilworth Country Foods plant, and now processes his milk to be sold under the Kenilworth Dairies brand.
He is one of the Queensland farmers who has been able to reinvent his business and survive.
“We had 1,545 farmers [before deregulation] in Queensland, and now we’ve got something like 280,” Mr Cochrane said.
“It’s an enormous amount, nearly 80 per cent, that haven’t made it.”
He shares in the pain of those who have not been as fortunate.
Mr Cochrane is also an auctioneer, called in to sell off dairy cattle when a farm closes.
“I’m the goose that’s out the back of the dairy after I’ve sold all the cows and you’ve got this rough and tough farmer with tears running down his face … because their business is gone,” he said.
“I often say when I’m up auctioneering that there’s 100 years or 60 years of work gone into this [sale] and I’m going to have all these cattle sold and dispersed.
Could not ignore deregulation
Mr Cochrane said many farmers in his part of the world were naive about deregulation.
“We had all the warnings of what it would do or what it could do … but because you don’t want that you tend to ignore it. But it wasn’t long before we realised we couldn’t ignore it,” he said.
“We wanted to produce milk, to produce food, and we thought we would find a way through it.”
Or ignore dollar a litre milk
Mr Cochrane said if farmers managed to ignore deregulation in the early days, another major change that was much harder to ignore was the introduction of dollar a litre milk in 2011.
“We strolled along fairly well … but things got very tough very quickly. We’ve had a major decline,” he said.
In purchasing Kenilworth Dairies Mr Cochrane has been able to take control of his fortunes.
“Because I had feared that you would no longer be able to send your milk across the grid and get a solid return.”
Currently, four other farms also supply Kenilworth.
Mr Cochrane said that while the diversification had left his own farm business in a better financial position, the industry itself had suffered.
Moving for generational security
Farmer Lisa Broad said she had endured a lot of sleepless nights in recent years.
After dairying at Lockington in northern Victoria for 20 years, and another seven years before that at a nearby property, she and her family moved their farming business to Gippsland last year.
High water prices and feed costs have made business difficult for many dairy farmers in northern Victoria.
“It wasn’t an easy decision by any means, but it was a decision we felt we needed to make to secure our farming business into the future,” Mrs Broad said.
Mrs Broad and husband Lynton also farm with their son Gavin. The involvement of their son was a key part of the decision-making process.
“We felt that if we didn’t make the move together, we didn’t see that Gavin would have been able to make the move down here later if things continued to get tougher in northern Victoria,” she said.
“That was the deciding point to get in the car and go for a drive and see what other areas could offer us what we wanted within our business.”
Mrs Broad said dairy businesses were constantly evolving, and that while moving operations to Gippsland was a major change, she had found it was important to “trust your decision”.
“But if it’s not the right decision own it and move on. You’ve always got good support around you,” she said.