Dairy deregulation to force farmers off the land

By Boyd Champness

DEREGULATION of the Australian dairy industry is likely to force up to one third of the nations 13,000 dairy farmers off the land, according to the Federal Minister for Agriculture, Mr Warren Truss.

The Federal Government announced last week that a (AUD) $1.8 billion restructuring package would be made available to dairy farmers to help them adjust to the deregulation of their industry, which is scheduled for 1 July 2000.

According to a report in The Age newspaper, under the restructuring package – negotiated with the Federal Government on behalf of dairy farmers by the Australian Dairy Industry Council – the average farmer will receive (AUD) $100,000.

Under the plan, dairy farmers would receive (AUD) 46.23 cents for every litre of milk sold for retail consumption, and (AUD) 8.96 cents for every litre of milk sold for manufacturing of dairy products in the 1998-99 financial year.

Farmers who decided to leave the industry would also receive an extra upfront payment of (AUD) $45,000.

The dairy industry had requested a (AUD) $1.25 billion tax-free restructuring package.

Mr Truss said the government could not provide a tax-free package, which was why it had increased its offering to $1.8 billion.

He said the increased package would be equivalent to the industrys original request.

The package will be entirely funded by milk consumers through an 11 cent levy on retail milk prices.

Victorian farmers, where 63% of Australias dairy industry is concentrated, have been behind the deregulation push because they want access to the interstate fresh milk markets.

Milk going into fresh milk markets has traditionally sold at a premium to that going into manufacturing because state laws regulate the price, but this will end under deregulation.

Victorian dairy farmers receive about 17% of their total income from fresh milk markets whereas dairy farmers in other states receive up to 85% of their income from fresh milk markets.

Once deregulation is introduced, Victorian dairy farmers will be at a competitive advantage to farmers in other states and are the ones most likely to survive. Understandably, farmers in the other states are not eager to deregulate but would have little chance of bucking the trend once Victoria makes its move.

However, confusion over the result of the recent state election in Victoria has the potential to scupper the entire deregulation package.

The Liberal/National Party coalition initiated deregulation in its previous term but the unexpected strong showing from Labor and independents on polling day a fortnight ago has left the coalition in a caretaker role with not enough seats to rule outright.

With Victorias smaller dairy farmers having second thoughts about deregulation, Labor has promised a thorough consultation process before proceeding with deregulation, in the unlikely event it gains enough seats to govern.

The coalition is expected to form government, however, the result of a forthcoming by-election means it might have to rely on the support of three independents to pass its legislation, which is no fait accompli following a tenuous relationship between the government and the independents in the previous term.

After deregulation, the price that milk processors pay farmers for retail milk is expected to fall by between (AUD) 20 and 25 cents a litre, causing a dramatic reduction in income for dairy farmers who produce milk predominantly for the fresh milk or retail market – namely all farmers except Victorian dairy farmers.

A Federal Senate inquiry into deregulation will hand down its report this week advising farmers to fight deregulation, saying thousands of dairy farmers across Australia will be forced into bankruptcy if deregulation goes ahead.

A committee member, Senator John Woodley, told The Age he was not going to stand by and watch farmers and consumers line the pockets of manufacturers who were behind the deregulation push.

“Im not going to watch the complete destruction of regional areas across this country, about 3000 of farmers driven out into bankruptcy and an increase in milk prices for consumers, just so manufacturers can get some of the cream,” Senator Woodley told the newspaper.

“Im not just going to stand by and let this happen. I am absolutely outraged by it,” he said.