THE largest buyer of milk from Queensland farms, French-owned Parmalat Australia, has delivered a confronting message to dairyfarmers to rid themselves of the “protectionist mindset” and “disinterest in being nationally competitive.”
Against a backdrop of negotiations over farmgate prices between the processor and farmer collective bargaining group that is now in arbitration, Parmalat has made clear it can survive without Queensland milk.
Parmalat’s opinion: “The simple truth, which the wider industry understands, is that the subtropical climate of Queensland provides less than ideal conditions for dairy cows.”
The company, which has factories in Rockhampton, Nambour and South Brisbane along with 12 other plants around the country, including Darwin, slammed producer attitudes in its submission to the Fair Milk Price Logos Bill, currently under investigation by a Queensland parliamentary committee.
The logos are designed to inform consumers the region where the milk was produced and that the dairyfarmer received a certain minimum price for the milk.
Parmalat says the concept amounts to an exercise in quasi re-regulation of farm milk price.
“Imagine if that same mindset was applied to bananas and Victoria chose to establish a fair price for bananas that encouraged banana production in that state,” Parmalat chief executive officer Craig Garvin said in the submission.
“That mindset is not found in Queensland beef, tropical fruit or grains.”
General manager supply chain, Vince Houlihan, backed that up that in an interview with Fairfax Media today.
He said while it was not what a ceasing of milk production in Queensland would not hurt business
“We have a factory in Darwin and there is no milk production there - we tanker it up from Adelaide and have done so successfully for a decade or more,” he said.
“It is more efficient to move raw milk than the finished product.
“The rule of thumb is you build cheese and powder factories where the milk is and you build fresh milk factories close to the market. That’s how the logistics work out the best.”
Keep in mind, Mr Houlihan said, there is 150 million litres sitting in Far Northern NSW only 70 kilometres south of Brisbane.
Parmalat says the underlying principle of Australia’s market economy is that goods and services trade freely.
Queensland processors can source milk from the Riverina for an extra 15 cents per litre in freight, it says.
The Queensland dairy industry, according to Mr Houlihan, was “unwilling to make itself competitive on the eastern seaboard.”
Queensland dairyfarmers were simply ignoring the fact that market forces were creating productivity pressure, he said.
“When you raise this point with them, the overwhelming response is 'we are subtropical, we will never be competitive',” Mr Houlihan said.
“Take a look over the ditch at New Zealand where the goal is 2.5 per cent productivity gain every year for the next 10 years.
“They are obsessed around genetics and Victorians are now as well.
“Queensland litres per cow per year are nothing like our southern counterparts.”
Parmalat believes consumers would not support a fair milk price logo in any case, arguing history has shown purchasing behaviour is driven by price.
The recent shift away from cheap private label to brands, on the back of social media outpourings of support for farmers, only lasted four to five months, it says.
“Product of Australia means something, and there is potential for a brand premium in regional origin, such Milk of Toowoomba, but it doesn’t translate to state,” Mr Houlihan said.
Parmalat’s submission to the Queensland Agriculture and Environment Committee’s inquiry into the Bill said it was difficult to see how the concept of a fair price marque developed to overcome exploitation of farmers receiving less than 1pc of of the consumer price was in any way applicable to first world dairyfarmers and fresh milk in Queensland.
“It is a significant stretch to suggest a dairyfarmer who has captured 59 per cent of the consumer shelf price is being exploited,” Mr Garvin said.
“Despite a lower consumer price, dairyfarmers today take the highest portion of the shelf price that they have achieved in 16 years.
“The dairyfarmer has not been the one to absorb declining margins.”
On the subject of current farmgate negotiations with producers, Mr Houlihan said the one thing perhaps not clear was that the two parties had an agreement to bargain and that process was simply being played out.
Parmalat says it sought to bring milk price in line with its competitors.
It’s proposal was to lower its price, initially by 1.6 cents/litre, from a base price of 59 cents/litre, but as negotiations continued it improved its offer to a drop of 0.8 cents/litre.
Farmers, through their collective bargaining group Premium, have said they could not absorb any decrease and market conditions were, rather, pointing to farmgate prices at least holding, if not lifting.