Deregulation Down Under a mixed blessing
Deregulation Down Under a mixed blessing
SIX years after the UK went through it, the Australians have followed suit. But deregulation Down Under has proved a bitter-sweet scenario, writes FWis Australia correspondent Boyd Champness
Australias dairy industry was deregulated on July 1 after farmers in Victoria, who produce 65% of the nations milk, voted to scrap the regulated milk market in their state, effectively dragging farmers in others states kicking and screaming with them.
The process has been both a roaring success and a complete disaster, depending on who you speak to and which state they come from.
Dairy farmers in Victoria had enviously watched their interstate counterparts receive higher prices for drinking milk over the years.
Before deregulation, only 7% of milk production in Victoria went towards the premium drinking milk market, with the rest used for manufacturing.
The reverse was the case in New South Wales, Queensland and Western Australia where 50-60% went into liquid milk.
For its part, the federal government offered all dairy farmers a A$1.7bn (£627m) restructuring package with those hardest done by to receive a greater share of the package. Victorian farmers, for example, received just over A$70,000 while farmers in WA received more than A$140,000.
The only catch was that all states had to agree to deregulation.
it finally went ahead on July 1 and there was little price movement until about three weeks ago when supermarkets started a discount war, resulting in farmgate prices for fresh milk dropping from 48-55c/litre (17.7-20.3p/litre) to 28-30c/litre (10.3-11p/litre) in NSW, Queensland and WA.
Farmers in NSW, Queensland and WA produce about 2.527bn litres. The drop in fresh milk prices has resulted in their incomes falling from a collective A$1.314bn to A$746m – a fall of 43%.
Meanwhile, farmers in the southern states are enjoying the sharp price rises in skim milk powder which have jumped from US$1400/t to over US$2000/t in the past three months.
This price rise, coupled with the weak Australian $, has effectively offset deregulation for farmers in Victoria, Tasmania and South Australia. How long that lasts remains to be seen.