Dairy support package brewing

Mr Joyce has also thrown his support behind a marketing campaign by Coles to establish a dairy industry support fund via a 20 cents per litre milk price increase.

The Nationals leader, Regional Development and Regional Health Minister Fiona Nash and Health Minister Sussan Ley met with dairy industry leaders and local farmers yesterday near Shepparton in northern Victoria with the dairy crisis gathering intense public attention.

Closed door talks were held at the Pactum Dairy Processing Facility to help the government fine-tune its response to the viability crisis that ignited when Murray Goulburn declared in late April that it would slash price estimates and other milk processors followed.

Coles announced yesterday it would launch a new milk brand to help put more money into the pockets of more than 2600 dairy farmers in Victoria, NSW and Tasmania with the additional 20c per litre to be deposited into a dedicated fund.

The company has been castigated for selling milk at $1 per litre since 2011, which industry members warned was unsustainable, but said it would now also contribute $1 million to set-up a sustainable dairy industry fund, to administer the 20c initiative.

Mr Joyce said in talks with food retailers about the farm gate price cuts, he had asked other major retailers to follow Coles and increase their milk prices.

“I know other people that have a sense of cynicism about it, I don’t,” he told media after the closed door meeting.

“I’ll always commend people when they do the right thing.

“Let’s make sure that we get a whole range of the retailers understanding how important it is to get a price of milk that actually reflects the work that the dairy farmers put in.

“You don’t have to be a dairy farmer - all you have to be is a Victorian or a Tasmanian or from NSW - the biggest issue today is dairy.”

Ahead of the closed door meeting, Mr Joyce visited the Goult family dairy farm near Shepparton to consult with local producers about the type of government assistance measures they needed.

Scott Fitzgerald – who supplies milk to Murray Goulburn and farms at Tongala – said the shock and emotion of the farm gate price cuts was hard to digest initially but having sat back and watched the dust settle he believed his farm was “not in a bad position”.

“We’ll be definitely working pretty hard; focussing on the one percenters,” he told the minister adding they would look at cutting fixed costs, to help get through this year.

Mr Fitzgerald said as a young farmer he was probably lucky to have entered the industry when it was “on a high” but others who started a year ago would be under a “lot of pressure” now, although many producers were carrying high debt levels.

He said low interest loans or close to no interest loans would be an ideal form of support from the government to assist farmers, which Mr Joyce said “we can get close”.

Mr Joyce said for those doing it “completely tough” the government had already started providing farm household allowance payments to “keep the wolves from the door”.

He said the Agricultural Competitiveness White Paper had provided a concessional loans funding program, with the cheapest money allocated for drought recovery which he was trying to change the eligibility criteria of, to suit support for dairy farmers.

Mr Joyce said the interest on those loans would be reduced to 2.66 per cent on the first of August and “that’s as cheap as you can get” but stressed proper oversight was also needed.

He said Rural Financial Counselling Services could also be provided to support struggling dairy farmers.

He also backed Coles offering another 20c per litre on milk and said he’d encourage Aldi and Woolworths to consider their positions.

“They followed each other down to $1 per litre milk - let’s see if they can follow each other out so we can get to a more sustainable price,” he said.

Mr Joyce said he believed the dairy industry’s long term outlook was strong despite a current over-supply on the global stage.

“Globally the world is not going to be consuming less milk,” he told dairy farmers.

“We have the issue in Europe with a (supply) glut in Europe but that will wash through - they always do and then the natural trend of milk consumption, especially the exponential growth in Asia, is up.

“It’s not like people have gone off milk like they’ve gone off cigarettes - that‘s not the case - there’s a stronger demand for it.

“And we’ve got to make sure we keep young farmers on the land - that’s important.

But local dairy farmer Nathan Shannon told Mr Joyce a lot of money had been invested in the region into milk production and unless the cost of production was fixed, farmers may be forced to revert to cropping or other food production options.

“We don’t always have to be tied to dairy,” he told Mr Joyce.

Mr Joyce later told media Farm Household Allowance was available and “We’ll see what we can do to get further resources into that space to assist people to get through the paperwork”.

“They acknowledge that this is of great help once they get it but they want a process - they want greater assistance to actually get the paperwork done,” he said.

Mr Joyce said he would talk to the Finance Minister about making sure the concessional loans’ criteria was changed to deliver support to those people facing the crisis, at a cheaper rate.

“We have access to a quarter of $1 billion per year which we got through the White Paper and concessional loans so let’s see if we can make more of that available to people in the dairy industry,” he said.

Mr Joyce said the price reduction would be “more widely felt later on” but was currently concentrated on Fonterra and Murray Goulburn – but a strong global outlook for dairy meant, “it’s not a case of the industry is in a systemic downturn”.

“It’s got a short-term problem and we will find our way through this and we will continue on,” he said.

“I’ve tried to be as honest as I could in appraising the situation and of the things that we can do.

“There were other suggestions made of certain issues and people around the room rejected them.”

Mr Joyce said dairy industry members had promised to provide him with a statement on their support requirements, following on from yesterday’s meeting.

“There are a couple of other issues that we said we are going off-line with to make sure that we get a result,” he said.

“We are already working towards the solution right now.

“We will be continuing on with the solution.

“I really want to make sure people clearly understand it’s not as if we are not doing anything and we are going to start on Thursday - we have already started.

“We are already working on it.”

Mr Joyce said the dairy supply glut in Europe emanated back to trade sanctions imposed against Russia, in August 2014 in response to Malaysian Airlines flight MH17 being shot down over Eastern Ukraine, the month before.

He said European milk was “trying to find a different market” which was causing the glut.

“You’ve also got a change in how Europe is dealing with some of their subsidies in the production of milk which are causing problems as well,” he said.

But he said the long-term trajectory on dairy consumption remained strong, with about 1 to 2pc growth annually.

“Whenever milk solids get around over 600 cents you’ll get a lot of people who will flow into the marketplace and we’ve had a lot of people flow into the marketplace and then you will get a correction and they start flowing out,” he said.

“But the long-term trajectory is still one of growth.

“If you came down and said there is something systemically wrong in dairy production and there is no real prospect of it ever getting better then you’d have to say ‘we’ll have to start looking at exit packages’.

“I’m not going to even mention the word exit packages because I don’t believe that is the case.

“There is still a massive demand in these markets and I don’t want to start sending messages that we have a systemic problem and a complete change in culture around the consumption of dairy products - we don’t.”

Coles Managing Director, John Durkan, said he wanted the 20c per litre initiative up and running as soon as possible to put additional dollars into dairy farmers' pockets.

“It’s important that we have a vibrant dairy farming sector, and we can only have that if we work together to ensure the long term health of the industry," Mr Durkan said.

Coles said it would provide the initial $1m investment utilising it’s $50m Nurture Fund, set up in 2015 to support innovation and capital projects by small producers.

It’s understood Mr Joyce will need to hold talks to seek agreement from Shadow Agriculture Minister Joel Fitzgibbon before any formal package can be announced, due to caretaker government conventions of the July 2 election.