By Boyd Champness

SYDNEY – Plans to deregulate the farmgate price for milk in Australia, by removing domestic market support and market regulations from 1 July next year, have come under fire from some farmers in the southern state of Victoria.

In December last year, dairy industry leaders agreed on a A$1 billion (US$630m or £400m) compensation package to help farmers adjust to deregulation.

Its ironic that farmers from Victoria should oppose deregulation, because half of the package will go to them, while the remainder will be split between the other states.

The reason Victoria benefits so handsomely is that it is a large market and 85% of its production goes into the more valuable manufacturing side, as opposed to market or fresh milk sold at retail.

The United Dairy Farmers of Victoria, the Australian Dairy Farmers Federation and the Australian Dairy Industry Council have all agreed on a plan known as Option Eight.

This involves the simultaneous and orderly deregulation of milk marketing controls nationally and a compensation package for farmers.

The package is supposedly equal in value to what farmers would receive in the current environment over the next three years.

But some farmers are concerned. In a letter to the editor of Stock and Land last week, a group called Concerned Dairy Farmers – which includes a number of prominent producers – argued that the winners from deregulation would be the supermarkets, and that the proposed buyout package has less than a 50% chance of being passed by the Federal Government.

“No-one else in the world is deregulating their dairy industry at the farm gate. Deregulation does not have to happen. No government, state or federal, is calling for it,” Northern Victorian dairy farmer Lynett Griffiths, a member of CDF, told the Stock and Land.

The group also believes the compensation package will result in farm values dropping by 20%, and small farmers who run 150 cows or fewer – which means about 70% of farmers in Victoria – losing $31,000 (US$19,000 or £12,000) in the first year alone.

This, the group says, could force up to 20% of farmers out of the industry.

Federal Minister for Agriculture Mark Vaile said he would look at any package as long as there was unified support for it.