‘Free Trade‘ and ‘Industry Deregulation‘ kill local business eventually in any domestic industry. Both terms are misnomers and euphemisms used in globalist economics propaganda.
It’s all about powerful vested interests bribing politicians to facilitate a free-for-all greedy legal framework to allow inevitably big fish corporations to gobble up all small fish small businesses. It’s really about ‘market globalisation‘, ‘market power abuse‘ – so across Australia both Liberal and Labor globalist parties share these economic growth goals under their joint policy of ‘neo-liberalism‘.
How does all such economic rationalist theory translate into industry practice?
Well simply consider the demise of Australia’s Dairy Industry since deregulation in 2000. Export greed has got Australian dairy farmers in crisis as the cartel of a handful of large milk producers and the Coles-Woolworths supermarket cartel price-gouge for notional market share motives.
Dairy Cartel Pricing
On April 27, 2016 Australia’s largest dairy processor Murray Goulburn declared it was cutting the farmgate milk price it pays Australian dairy farmers (mainly family businesses) from $5.60 per kilogram of milk solids to between $4.75-5 per kilogram, because it could. It has dominant market power of demand to do so. It shares that power in a duolopy with its main rival, New Zealand dairy processor Fonterra.
In a cartel domino effect, foreign-owned Fonterra a week later on May 4 quickly followed suit, declaring it was also cutting the farmgate milk price and reducing payment of Australian dairy farmers from $5.60/kg of milk solids to just $5/kg.
Then a third milk processor in the cartel, Japanese Kirin Holdings owned Lion Dairy and Drinks, a week later on May 10 declared it was similarly cutting its farmgate milk price from $5.97/kg to $4.65 per kg.
Worse. Both Murray Goulburn and Fonterra jointly declared they were doing this cutting somehow “retrospectively”. This means the revenue they paid the dairy farmers over the past two years is now owed by the family dairy farmers back to Murray Goulburn and Fonterra and suddenly are seeking to recover the money they now claim is “overpaid”.
Yep, unregulated Free Trade it’s called. Australia has about 6000 dairy farms and the industry revenue is about $13 billion a year, so enough to go around for all concerned to be viable if the ownership and control was fair. But it isn’t. Murray Goulburn, which started off as a co-operative of just fourteen farms in central Victoria in 1950, now controls about 40% of Australia’s milk processing supplied by about 2500 dairy farms. Fonterra controls about 20% share supplied by 1200 dairy farms. Together they form a market demand duopoly along with a few other similar minded corporates, run as an unfair pricing cartel.
Foreign corporates with lesser shares in Australia’s milk processing market have not followed the duopoly. The French-owed Lactalis Group behind Parmalat (Pauls brand) said it was not cutting its farmgate milk price, nor is New Zealand owned A2 Milk Campany, nor Tasmania’s Burra Foods – set to be bought out by the Chinese.
Liberal Party Deregulation decimated Dairy Farmers
Since John Howard’s Liberals dairy deregulation in 2000, when Australia had 13,000 dairy farming families, fair price setting went out the window. He and the nationals leader, Warren Truss as Federal Agriculture Minister, removed the quotas and the levies and the set prices protecting farmers. State borders meant nothing and now international border mean nothing.
It was called ‘economic rationalisation‘ based upon ‘economies of scale‘ – that is, all about big fish buying up the smaller fish to whittle down Australia’s dairy industry to fewer powerful and richer corporate players.
In 2005, foreign Fonterra bought out Bonlac. Tamar Valley was swallowed up because the big bully price cutting forced it to the brink of bankruptcy. Other Australian independent milk producers have been swallowed up – United Dairy Power, Sungold Milk. In 2011 Bega Cheese (Western Star Butter fame) merged with Tatura Milk Industries. Devondale and Liddell’s have been swallowed up by Murray Goulburn. Japanese Kirin owns milk brands Pura, Dairy Farmers, Farmers Union, Moove, Dare, Big M and Masters. Kirin owns the cheese brands Coon, King Island and Heritage, plus the Yoplait brand in yoghurt. In 2008, in conjunction with Warrnambool Cheese and Butter, it purchased the NSW co-operative Dairy Farmers Group. Then in 2014 Warrnambool Cheese and Butter was swallowed up by Canadian multinational Saputo. Norco Co-operative is still independent since 1895 but is the milk prodcuer behind the cheap private milk labels of Aldi and Coles, selling for $1 litre. Parmalat is behind Woolworth’s $1 litre milk.
It’s a price undercutting race to the bottom where milk is just $1 in the shops, and where a few producers control the price to suit themselves. If the milk producers choose to sell milk cheap, this should have no bearing on the fair price they pay to the dairy farmers. If Murray Goulburn and their cartel choose to sell to Coles or Woolworths below wholesale cost, then that should be their internally flawed management decisions.
Similarly, the supermarket cartel of Coles and Woolworths should have no say in the minimum fair price they pay the milk producers either. If the Coles and Woolworths cartel choose to sell milk for retail below wholesale, such a price war should be Coles and Woolworths self-inflicted profit gouging. The supermarkets must take the hit on their margins. Australian grocery consumers happily paid $1.50 for quality milk before deregulation, so do it again – everyone wins!
Why should dairy farmers be pawns in a downstream market share game? Why should a greedy cartel be allowed to cripple Australian dairy or any local farming for that matter. Why should foreign markets in Europe impact Australia’s domestic milk production? Why should cheap imported produce be allowed to undercut fair viable pricing by local industry?
Deregulation, Free Trade and the ACCC is accountable here. Rural Australia can point to the Nationals’ Warren Truss for their demise. he was the criminal mastermind behind the dairy deregulation.
In 2016, Australia only has 6000 dairy farming families. The rest have left the industry or been forced out. Back then farmers were at a loss how they will cope. Now another wave of forced bankruptcies is happening and farmers are at a loss how they will cope.
Australia’s remaining 6000 dairy farmers, mainly small family businesses, have now gone into a state of shock. Many are facing financial ruin as a direct consequence. Many are being forced to flog off and kill their milking herds for dog meat. Many are in a psychological mess. Many are walking away from the ancestral family farm. Some have tragically suicided.
The corporatisation and deregulation of our local milk industry, an Australian staple, has made producing milk for Ordinary Australians, so dependent on exports (40%) and the export market pricing, that more than 4000 small dairy farming families around Australia risk going to the wall. International competitiveness means more than supplying local milk at a fair price. All the commissions, councils, federations and bargaining have gone out the door.
It’s called Free Trade, where all protections to local businesses are thrown out the window for a few corporates’ greedy export profit.
Murray Goulburn abandons Profit
And Murray Goulburn, (Murray Goulburn Co-operative Co. Limited) supposedly a “farming co-operative” floats on the Australian Stock Exchange in July last year, and raised $500 million to construct two fancy factories that went over budget.
One factory in Koroit was for a $300m gamble to export 90,000 tonnes of infant milk powder a year to fat Chinese babies. Another $80m went into building a chilled milk processing plant in 2014 in Melbourne’s Laverton North purely to supply Coles with its cheap private label branded 2-litre and 3-litre fresh milk. It’s all milk volume not profit, except if you’re the MD, and cheap migrants on 457 visas are employed there, else its run by AGV robots. A second similar factory is being built in Erskine Park in Sydney.
Murray Goulburn started the price gouging, conveniently blaming some notional deteriorating global market trend.
Murray Goulburn pays its executives and management board aristocratic salaries, as if a return to medieval manorialism. Murray Goulburn’s boss, Managing Director, Gary Helou, (an Arab) paid himself $3 million a year in salary and perks, drives luxury cars and owns a $3.2 million luxury home in Sydney’s exclusive Dural. The luxurious modern five-bedroom, six-bathroom house (below) boasts a swimming and spa pools, covered outdoor entertainment area, tennis court, designer kitchen and landscaped grounds.
Murray Goulburn’s management and board have all been about high risk – expansion, growth and jobs. Managing Director, Gary Helou, said bugger the profit, bugger the dairy farmers and their livelihoods. Profit is all about timing of executive big fat bonus, then I’m gone-ski, hasta la vista baby, next industry!
Helou’s expansion plans were all about sales not profit. So he downgraded its profit forecast and Murray Goulburn after its end of year profit was slashed from $86 million to $39 million. Woops. So he imposed the 20% price cut to dairy farmers – expected to cost the average dairy farmer $127,500 over three years and send many to the wall.
Now he’s done a runner and resigned. He’s pocketed $10 million in bonuses and contract parachute payout. His chief financial officer Brad Hingle also ran with his payout. Helou, the Arab, is named in a shareholder class action lodged rightly by dairy farmers in the Victorian Supreme Court over the losses. Corporate regulator ASIC has launched an investigation into the information Murray Goulburn (MG) supplied the stock exchange since releasing its half year results on February 29 misleading the market about overstated revenues and expected profit forecasts.
Also ACCC Chairman Rod Sims said, “The ACCC will consider whether the changes have involved misleading conduct or whether there are elements of unconscionable conduct.”
For Helou, the cows are coming home and they will follow him to Dural with a message.
Unconscionable Conduct by the Two Cartels
The price cutting by both cartels (the supermarkets and the milk producers) has placed thousands of Australian dairy farms in financial stress. They can’t afford to repay two years revenue to the greedy big producers.
Victorian dairy consultant John Mulvaney said his MG clients were still in shock.
“People are having difficulty understanding how you can receive a price for a product and then the person who’s paid to that price come back and say ‘I’m sorry we’ve overpaid you we need some of that money back’. Very simply that’s what’s occurred. I have had calls from people, particularly younger farmers, who already were under some pressure as a result of difficult seasonal conditions this year. They’re running fairly high debt levels and some of those — not many of them but some of them — may not survive.”
Some 2,500 dairy farmers throughout four Australian states are affected – in Victoria, Tasmania, New South Wales and South Australia. The average dairy farm “debt” is between $100,000 and $120,000. Struggling farmers have three years to pay it back, with interest, or else be exposed to stonewalling reposession action by the big four banks, who couldn’t give a family shit.
Victorian dairy farmer, Will Ryan (26), runs his parents family farm in Dumbalk, South Gippsland. He holds an agribusiness degree, considerable experience and market savvy, but looks like having to sell off 400 dairy cows and leave the family farm. Just a few weeks ago he and his family made the heartbreaking decision to sell the farm. Drought, debt and the state of the unregulated dairy industry has made it impossible for Mr Ryan’s dairy farm to be viable.
“The mood is hauntingly depressing. It’s a difficult time for many farmers [in drought-affected areas] who have taken on large debts and spent a lot of money on buying hay to get through the summer. It’s difficult to get up and work 16 hours a day and to know that you’ve lost $1,000 or $2,000 for that day.”
Inverloch dairy farmers Bec and Glen Casey run a 302-cow share milking operation and sell their product to Murray Goulburn.
“A lot of our budgeting relies on mother nature, which is a massive uncertainty for us. We have to have faith that the price that they open with is the price that they are going to stick to for the season. I knew that because of all the downward trends next year’s opening price would be a lot lower, but I was completely blindsided by this announcement. Two years’ profits gone in one day. It feels like someone’s come in and taken half the herd from underneath us. I’m absolutely gutted.”
The Caseys owe $103,000. An emotional Mrs Casey broke down as she grappled to explain their new financial situation. “To have corporate come in and put us in this position is just absolutely gut-wrenching,” she said.
Jessa Fleming, who runs a 420-acre dairy farm in Gorae West on Victoria’s southwest coast with her husband, said the milk price cuts announced at the end of April have been devastating.
“Before costs we’ll be receiving 39 cents a litre,” she said. “For us to be able to service our loan repayments and feed our animals, it would have to be at least 45 cents.”
Before the artificial collapse in farmgate milk prices, the Flemings were receiving $5.60 a kg for milk solids which admittedly went to the export market. She said at that price they were able to service their loan repayments for six to eight months of the year. Ms Fleming said Murray Goulburn’s sudden cuts forced them to cull their milking herd down from 300 to around 260 because it was no longer profitable – for export mind.
But why should Australia’s domestic milk market be adversely impacted by fickle global export supply and demand forces?
Young Gippsland dairy farmer (and her dependent family) in Drouin South, Adam Nelson (26) has been forced to shut down his beloved dairy as the Aussie milk crisis deepens. He’s had 80 head of cattle removed from the property a few weekends ago to avoid escalating costs and keep the bank off his case.
Said Adam, “This is going to tear families apart. The repercussions of this have nothing to do with dairy farming at all.’’
Adam says he’s mentally fine, sanguine, and convinced he has made the right decision — but who remains deeply angry — also poignantly linked his social media entries to crisis group Lifeline Australia, and Beyondblue. It is known one dairy farmer in South Gippsland – a supplier to Australia’s biggest milk processor Murray Goulburn which started the milk price collapse two weeks ago – has tragically committed suicide.
Mr Nelson said it was time for the wider public to throw its support behind struggling farmers.
Dairy Farmers Abandoned by Government
As the farmers’s so-called “debt” does not follow them, it leaves believers in the co-op system like the Caseys with a difficult choice: stay and share the financial pain with your fellow farmers or quit supplying the company and possibly save your business.
Suddenly, the Nationals are taking an interest of the mess created by their retired leader Warren Truss. His replacement, Barnaby Joyce, has announced a reactive $579m Dairy Farmers hand out by taxpayers. Something about temporary band-aid “concessional loans” for a few years and some electioneering irrigation upgrade in the Nationals-held seat of Gippsland.
“We’re giving immediate assistance to dairy farmers in crisis,” bleats Barney. “I was pleased to meet dairy farmers in Victoria last week and the Coalition wants to send a clear message that the Coalition stands shoulder to shoulder with them.”
It’s bullshit. It doesn’t change the milk price. It doesn’t outlaw and reverse the unconscionable retrospectivity by MG, Fonterra and Lion – their fabricated debt still persists with the thousands of dairy farmers.
Coles last week announced a new milk brand that will tip in 20 cents a litre from its milk sales to the dairy farmers – big of them. At the same time on the supermarket shelves of the supermarket cartel, both Coles and Woolworths empty their shelves of branded milk so restricting consumers only to Coles and Woolworths labelled milk – jointly flogged at $1.
But it is too little, too late by government, as always. Government deregulation of Australia dairy set it up in 2000 for a free for all survival of the fittest, with abandonment of any sense of there being a viable and competitive fair market for small farmers, no sense of ensuring a sustainable agriculture sector, but instead setting up dairy farms for market power abuse.
There is now an air of panic and gloom in southern Australia’s dairy industry, with some farmers leaving Murray Goulburn to supply other dairy companies.
Comment by Brian in The Australian newspaper, May 16, 2016
“This “perfect storm” disaster is arguably a manifestation of a flawed laissez-faire economic philosophy, that gave birth to deregulation of the dairy industry. “Get big, or get out” was the new mantra that even the so called agrarian socialists within the National Party embraced. It’s not surprising therefore that farmer Co-operative Murray Goulburn rationalised the need to list on the ASX, being a purest extension of this this economic ideology.
At that point Murray Goulburn is answerable to its shareholders/unit trust holders ahead of its dairy farmer base. Throw in the love affair with (so called) ‘free’ trade agreements (FTA), product dumping onto our markets, plus all manner of government regulations surrounding the dairy industry and we have a recipe for the current disaster. Once-upon-a-time, when Australia had real leaders running the country, there was a widely held consensus, the real wealth of a nation came from its manufacturing and farming base, that these industries were sacrosanct and needed some degree of protection from predators. This thinking all changed with the new breed of political ‘leaders’ who followed the great John McEwen in the Country/National Party. Australia is now reaping the whirlwind of this political folly and those responsible (especially those insipid souls in the National Party, who claimed to be representing our farmers) should hang their heads in shame.
Is it possible to put “humpty dumpty back together”? Not without the political will and wise heads at the helm. The investigation by the ACCC into the arbitrary milk price reduction to farmers by Fonterra & MG will sadly bring little joy a little late for dairy farmers.”
On May 25, 2016 hundreds of people took to the streets of Melbourne today at a rally in support of the Australian dairy industry. Dairy farmers marched from Federation Square to Parliament House in Melbourne calling for a government solution on the dairy crisis.
NSW Farmers group wants the government to step in to ensure bargaining equality and transparency in the dairy product chain – specifically criminally outlawing the cartel, a mandatory code of conduct for milk producers and supermarkets overseen by an independent ombudsman.
The big dairy producers crying poor are not suffering financially.
With such sales volume and market share, if the big milk producers can’t make a decent profit, it’s not the fault of their suppliers – the 6000 dairy farmers reliably delivering daily fresh quality milk.
And recent gross operating profit by Coles reported $895 million for the six months to December 31, 2015. Woolworths profit for the same half-year came in at $1.8 billion, apparently down because of its bad decision to set up Masters hardware.
Australia First Party calls on Australian farmers go much further to safeguard their future existences:
- Immediately legislate against the retrospective pass-on debts imposed by Murray Goulburn, Fonterra and Lion on dairy farmers
- Restore a $1.50 minimum milk retail price across Australia, with the new margin going to the dairy farmers, not to the producers
- Reintroduce industry regulation to Australian agricultural sectors to maximise a fair competitive market
- Protect Australian small business and industry from foreign dumping by regulating import tariffs and quotas
- Legislate to remove all industry duopoly and cartels in Australian industries
- Crack down on Coles/Woolworths market manipulation and abuse, as well as same on Murray Goulburn/Fonterra/Lion
- Scrap Free Trade across Australian industries and all such foreign agreements
- Separate Australia vital domestic industry regulations from high risk export opportunism regulations
- Many other measures for industry discussion