No where to turn for energy support

Crippling power prices drive dairy margins to new lows


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Fifth generation Richmond Valley dairyman Peter Graham says energy costs are cruelling his enterprise while production of dairy product continues to plummet.

Fifth generation Richmond Valley dairyman Peter Graham says energy costs are cruelling his enterprise while production of dairy product continues to plummet.

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A North Coast dairy farmer's energy bill is gobbling up more than its fair share of inputs but where is the on-farm support to help initiate change?

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Richmond Valley dairy farmer Peter Graham “RichRiver Dairy” at Codrington, has never before been paid so much for his product yet neither has he every been so paralysed by mounting on-costs to his 240 cow enterprise.

A Pauls supplier, the fifth generation Coraki district dairyman says 59 cents a litre –  padded with 3.5c/l drought relief money –  is historic for several reasons.

“We have never received so much for our milk but at the same time we have never seen such huge input costs –  particularly for energy,” he says.

With his dairy by the river and at the end of a local feed, Mr Graham has struggled with too many “brown-out” episodes, caused by a drop in voltage, which have wreaked havoc on single-phase motors.

When he looked into three-phase power availability he was told he would have to foot a $70,000 bill and still had 29 cents a kilowatt hour usage fee, so he looked to alternatives like solar but was quoted $180,000 just to run the dairy and this did not include batteries storage.

He was considering methane gas production from effluent but is found a lack of information and support for small scale production.

In the end he bought diesel generators and apparently saves money in that they run cheap and quiet – costing about 20c/kwh at peak power and only 14c/hr for about 80 per cent of the time.

Never-the-less the diesel bill alone tops at $8000 a month when irrigation is intense.

Balancing debt and bills Mr Graham says he is still paying money just to go to work each morning and in the current drought, with feed prices more than double and his own milk production down on average, the pressure is mounting.

Interest repayments as a component of his 59c/l farmgate return has now doubled to 15c while feed counts for close to 40c, with fuel and electricity gobbling up most of the remaining family enterprise milk cheque.

“I won’t give up without a fight,” says the fifth generation Mid Richmond dairy farmer who mother’s family came to the district to milk cows in 1860.

Mr Graham belongs to an extensive "club" of despairing dairy farmers, struggling for the same reasons, which is why Australian production has dropped from a peak in 2001-2002 of 11.3 billion litres. In 2010 the number was 9.1 bl. Last year there was 3 per cent growth on the prior year to finish at 9.29 billion litres. This season Dairy Australia is forecasting a drop of between five and seven per cent to something around 8.7 billion – that is under review and will probably be revised down in the coming week or so.

Energy costs are critical at this juncture, which is why the issue is an election focus.

“How I see it affecting our industry is that this loss of supply will cost us export opportunities or, worse, the domestic consumer will see milk off the shelf because it’s worth more overseas,” said Mr Graham.”The closest we’ll get to going without dairy is coming.”

“Our industry leaders have let the dairy farmers down by not being proactive at keeping their eye on the game. It's not a good way to spend industry funds."

“I won’t give up without a fight,” says the fifth generation Mid Richmond dairy farmer who mother’s family came to the district to milk cows in 1860.

“I won’t give up without a fight,” says the fifth generation Mid Richmond dairy farmer who mother’s family came to the district to milk cows in 1860.

Election issue

Meanwhile, the NSW government has adopted a technology-neutral approach to energy generation with $26 billion worth of new, large scale projects totaling more than 18,500 MW.

“The future is bright for new energy generation but it’s crucial a national policy is secured to unlock the investment we need for our energy future. Industry needs certainty to invest and adoption of the National Energy Guarantee is the best way to achieve this,” said a spokesman for NSW Minister for Energy Don Harwin.

“We also plan to supercharge the rollout of 300,000 household solar energy and battery storage systems. The Empowering Homes program, which will unlock a $3.2 billion investment, targets families with annual electricity bills over $2000 giving them access to solar energy during the day which is then stored when the sun goes down. This program will bring down bills and bolster our energy grid security using clean energy.”

Meanwhile the Government is looking at pumped hydro energy storage, which currently makes up 97 per cent of energy storage capacity installed worldwide, developing a pumped hydro “roadmap”, including a suite of initiatives to help create opportunities for pumped hydro in NSW.

Labor has promised to re-regulate retail energy markets if they win power while the Greens have backed a call for sensible pumped hydro projects.

Ash Salardini from NSW Farmers says price gouging from retailers unwilling to budge on solar feed-in tarrifs are part of the problem, with three to four cents a kilowatt hour difference between solar feed-in rates and the spot price.

Mr Salardini also questions the amount paid on the average bill for fixed charges - up to 40 per cent of the total - and which often supports under-performing infrastructure. That is something that NSW Farmers is campaigning for - the write down of non-performing assets so energy users no longer have top foot that bill.

Is there cause for hope?

John Droppert, Senior Industry Analyst with Dairy Australia says the rising skim milk powder price is definitely a positive, and the most likely source of improvement towards the new season.

“The challenge right now is that with milk production falling, manufacturers don’t have much product left to sell to take advantage, until next spring. It does, however, provide a bit more confidence in the market, which can only help in their deliberations about stabilising production through changes to pricing.”

“Butter and skim milk powder (SMP) are joined, but being co-products it’s actually more likely that higher SMP values drive butter lower, because higher SMP means more is produced, which means more butter. Butter isn’t likely to fall too hard though, especially in Australian terms, as there is still something of a shortfall on the domestic market. I think the falls we have seen have been more around global indicators as some of the more price-sensitive importers have pulled back.”

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