Australian Dairy Plan National Workshop Welcome address from Independent Chair – John Brumby
Welcome to the National Workshop for the Australian Dairy Plan.
Australia’s dairy industry is at a critical moment. It’s hard to overstate the importance of our discussions over the next two days. I know that many of you have travelled long distances and made real sacrifices to be here ... so we greatly appreciate the time you’ve committed, and the input you’ll provide.
It’s going to be a busy two days ... and, I hope, a productive two days.
Why are we here? We’re here because we need a positive plan for Australia’s dairy industry. A plan for the next five years and beyond. A plan that will restore profitability, restore confidence, and build unity and cohesiveness across the industry.
Getting the plan right is important for farmers, for processors, for consumers - in fact, for everyone along the supply chain.
But it’s also important for the Australian economy, and particularly our regions.
The dairy industry is one of Australia’s major rural industries:
With a farmgate value of $4.3 billion in 2017-18, it ranks third in size behind beef and wheat.
We export $3.4 billion of dairy products each year.
But it’s more than just a major producer—dairy is one of Australia’s few remaining successful manufacturing industries, producing healthy and high value products for national and international consumption.
We estimate about 42,600 people are employed on dairy farms and by dairy companies in Australia.
And that’s not counting all the associated employment—from transport to distribution, farm services, marketing and promotion, and R&D.
And then there’s the multiplier effect:
According to ABARES, farmers spend about 80 per cent of their milk receipts back into their local communities—that’s around $3.4 billion into regional economies each year.
Every $1 million in turnover in the industry is estimated to generate 8.56 jobs on farms, in processing, and throughout the community.
When you think about it, there’s hardly a regional electorate in Australia that’s not touched in some way by the dairy industry.
But in addition to the economic and community impact, dairy plays a major role in our national story and our national consciousness:
75 per cent of Australians regard the industry as a producer of high quality products.
A similar proportion of Australians see the industry as ‘vital to the Australian economy’.
So in many ways, there’s a positive story to tell about dairy’s contribution to our national economy, our regions and our local communities.
But as everyone in this room knows, the industry has also faced some big headwinds.
These range from cost issues like feed, water and energy right through to increased competition, drought and climate change.
And the convergence of all these factors means that profitability has been declining and the industry has been shrinking. Milk production has fallen to below 9 billion litres, many processors are short of milk, plants are significantly under-utilized, and our share of global trade has fallen to below 6%.
Many of you are familiar with the story:
In the 1990s production was strong and growing, reaching a peak of more than 11 billion litres in the early 2000s.
Since 2010 production has become more volatile each year. Last season’s very dry conditions saw a further drop of 8 per cent.
A growing population and per capita dairy consumption means that the proportion of dairy production available to export has dropped from 55 per cent in 2000-1, to around 36 per cent in 2017-18.
Australia’s share of the global dairy trade has fallen from 16 per cent in 2000, to 6 per cent last year - though of course this is a share of a much larger global market, with increased competition.
Our open market means Australians don’t have to choose local dairy products. A declining milk pool, combined with decisions to export a significant portion of what we produce, has opened the door to imports—and these have more than doubled in a decade.
So we have less milk overall, more competition at the farm gate, and more competition from imports - this all adds up to huge pressures on processors.
While volatility in prices continues to escalate, milk prices remain relatively high in historical terms and appear to be tracking upwards.
If we compare the relative growth of on-farm income to on-farm input costs over the last 20 years, it is evident that costs have increased faster than income - which puts many farmers in a difficult cash flow position.
And to all of this we can now add changing consumer tastes - particularly among younger people.
Non-dairy milk alternatives grew by 82 per cent to 95 million litres last year.
This is a hot market segment. It’s strong on social and mass media, and continually growing and diversifying.
Which brings me back to the task before us.
Today we have more than 130 people in the room from every part of the industry—farmers, processors, regulators, government, peak bodies, industry experts and service providers.
In terms of our discussion, nothing is off limits.......everything is on the table.
We want a frank and constructive exchange of views. And what we’re aiming for is consensus—not unanimous agreement. That means we need a respectful conversation, where everyone listens with an open mind to everyone else’s views.
And having attended many meetings and listened to a wide range of views, I’m certainly under no illusion about the complexity of the issues, or about the challenges involved in getting everyone on the same page.
Through our regional workshops in May and June we gathered an enormous amount of ideas, opinions and experiences.
The task now is to distil that knowledge into a workable plan that can turn the industry around and position it for real success in the future.
During the consultations I’ve been struck by a number of things.
The first is the human cost of the challenges facing this industry. We see the human cost in local communities and through stories in the media.
The broader impact is well summarized in the Australian Dairy Situation Analysis report produced for the Australian Dairy Plan. Copies are available if you don’t already have one.
The fact is, many farmers are feeling extreme pressure.
As someone who has known and been part of farming families throughout my life, I feel very deeply for them. It seems like you can put your life into farming, work 80 hours per week, try to do everything right, sacrifice a lot—and in the current environment, still not be profitable.
We have to work together to change this.
The second thing that struck me across all the workshops and meetings is a real appetite, a real hunger for change.
The level of engagement with the Australian Dairy Plan so far has been truly impressive.
Over 1,000 people attended 25 regional work workshops, and many hundreds more contributed online.
We know that trust has been a problem in the industry. That’s why I think the establishment of the Australian Dairy Plan—with best practice consultation and an Independent Chair—has been a good way to begin to tackle that trust deficit.
The third thing that has struck me is that despite the obvious pressures on the industry, there are also some real positives we can build on:
Dairy consumption in Australia remains among the strongest in the world.
Our products are well regarded internationally, and there are big opportunities to increase sales, grow market share and continue to win the confidence of consumers
And of course, many farmers in many regions are profitable. The challenge now is to lift the industry as a whole - to get all boats rising.
That means working together.
It means working to achieve value right across the supply chain.
It means understanding the needs and interests of consumers.
It means working towards stability and growth, so that investments can confidently be made for the future.
And it means getting the Australian dairy industry fit to compete in a changing and increasingly globalized world.
So what needs to change?
The regional consultation process has shown us that stakeholders across the industry have consistent views about the nature of the change required.
We need to reform industry structures to support more effective advocacy.
We need a greater focus on marketing and promotion so that the community values our products, our industry and our farmers
We need to address concerns about the imbalance of market power within the industry—people have expressed a variety of opinions on how to do this, from direct interventions to set prices, to more transparency in contracts between farmers and processors.
We need to increase our efforts to attract and support the next generation of farmers.
And we need to continually improve on-farm performance in a world of greater volatility and risk, and complex new production systems.
On top of all this, we need to address social license and environmental issues, which rank highly among consumers here and overseas.
In terms of the two day agenda, I can assure you that there will be a substantial amount of the workshop devoted to the big three issues: industry structures and advocacy; marketing and promotion; market power and dynamics. On the Number 1 issue of industry structures and advocacy, we’ll have a workshop session today, a guest speaker (Brian Ramsay) at dinner tonight and a full plenary discussion and Q&A for two hours tomorrow. There’ll be adequate opportunity to have a say.
We also need to think big and imagine what the industry can be if we get the plan right and work together.
In 2017 the National Farmers Federation announced a vision for agriculture to exceed $100 billion in farm-gate output by 2030.
Less than two weeks ago at the Daily Telegraph Bush Summit, Prime Minister Scott Morrison announced there will be a national plan to do just that. The plan will be backed by specific policies as well as the Government’s $4.9b Drought Fund.
My hope is that the Australian Dairy Plan can position dairy to be a big part of that vision.
And I believe the two days in front of us will be an important step towards that goal.
So today and tomorrow we want to:
Understand the opportunities for the dairy industry;
Respond to the key challenges our stakeholders have identified so far;
Clarify the breadth of the Australian Dairy Plan;
Confirm its key elements;
Test propositions about restructuring the industry to deliver the Plan;
And confirm the next steps.
This week’s workshop isn’t the last step in the process, but it gets us well past the halfway mark. There’ll be more testing and more discussion with peak bodies after this workshop, but my aim is to have a final draft completed by October.
And my last point is this:
In all the workshops, in all the meetings, we’ve had a strong focus on identifying the challenges facing the industry. Today and tomorrow, we need to be much more focused on solutions - practical steps and policies, for example: to improve industry structures and advocacy; to cut farm costs; to address concerns about market power; to lock in to the $100 billion growth target; to continue to lift consumer perceptions of dairy as a good, healthy and nutritious product.
These are just some of the issues we are addressing - but our focus must be on solutions.
We want a plan that each of our key partner organizations can agree to and take ownership of, and incorporate into their own plans for the next five years and beyond.
With that, I’ll hand over to Stephen Petrus of Nous, who will help to facilitate the day.
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