Cheap milk: Are dairy farmers in crisis in australia?

Updated: Nov 12, 2019

Australian dairy #farmers are in crisis. Since the #deregulation of milk two decades ago many are struggling in the face of drought and crippling debt. Some are looking overseas for relief while others are closing their doors. Australian farmers are hurting and with #climate change, on our doorstep, it's only going to get worse.

Within Australia, there are over 5,700 dairy farmers spread across the nation producing 9.3 billion liters of milk annually. 36% of production is exported while the remainder is sold to processors like Fonterra and Bega at the farm gate milk price. Unlike many countries around the world, the farm gate milk price is set by market forces as opposed to government regulation which can result in processors offering a variety of prices.

Although the farm gate milk price is historically good at present, farmers are feeling the pinch due to continuing drought which is raising the cost of feeding cattle, an increase in equipment costs and increasing debts. Some smaller dairies are struggling to keep afloat and on the verge of closing their doors. Dairy Australia reports that 1 in 5 dairy owners are planning to quit. There is no doubt that despite the farm gate price is high, it's still not high enough to cover the costs of sustainable farming and associated costs.

Supermarket chains like Coles and Woolworths are now being blamed for adding to the problem. Many consumers are siding with farmers and refusing to buy into the chains discounted milk supply and instead opting to buy from independent processors in hope to provide some relief. However as indicated by a Coles spokesman, supermarkets don't buy directly from farmers, but rather they source their supply from processors. Therefore Coles argues raising retail prices would not affect the amount paid to farmers.

There is no doubt Australian farmers are suffering and for those with the resources, some are even considering selling their milk to China. With claims that some buyers will pay up to 10 times the price of Australian milk buyers, it's no wonder some are considering sending their produce offshore. But where does this leave Australia?

In July 2000 the Australian milk industry was deregulated by the Federal Government whereby farmers were left to defend themselves on a world stage. Subjected to global pricing many dairies closed and left farmers being paid on average 42c US per liter, one of the lowest prices by world standards. 

Australia unlike many other countries around the world lacks the water resources to maintain dairies at consistently profitable levels. With that in mind, it seems ludicrous that we are competing in a global field with many international farmers operating on much lower running costs. With climate change setting in this is only likely to get worse as droughts increase and the cost of feeding cattle reaches astronomical levels. 

Make no mistake, our farmers are in #crisis and it's only going to get worse. Unless we can reduce the cost of farming in the face of #adverse environmental conditions this is an issue that will not only affect dairy #farmers but all farmers across the board. If we are going to solve this then we will need to solve it as a community. If not, the future looks bleak with our shelves being filled with cheap imported #organic produce.

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