Effects of dairy deregulation coming home to roost for farmers, shoppers

A NEW report into Western Australia’s dairy industry warns of dire consequences for producers if the price of milk at the farm gate does not improve significantly.

Many farmers are producing at rates above the current prices, however, the fall in gate prices has not flowed to consumers with the price of a litre of milk rising almost 10 per cent since deregulation in July 2000.

Since then almost 25 per cent or 100 farmers have moved out of the industry and, with many more leaving every month, some in the industry expect the numbers to be culled by another 30 per cent.

Commissioned by the WA Dairyfarmers Collective Bargaining Group, the Sustainability of Milk Prices in WA report released this month shows that total milk production in WA has fallen from 412 million litres to 393 million litres in 2001-02 while the number of farms has contracted from 411 to 318.

WA Dairyfarmers Collective Bargaining Group chairman John Cutbush said farmers this year had to contend with a 1.77 cent cut in gate prices as well as a significant increase in grain prices which added around 2 cents per litre to costs.

Taken together this means an average farmer producing around one million litres a year was $40,000 worse off than in the previous year.

Mr Cutbush said the local dairy industry was affected by the drought more than other States because of the restriction it placed on irrigation and  WA’s heavy reliance on grain.

Farmers producing less than 750,000 litres a year were tackling total operating costs of 31.2 cents a litre compared with milk prices of around 27 cents a litre. They are now waiting to see what milk wholesalers will offer to farmers in the next review of prices expected in the next few weeks.

Mr Cutbush said people were now living on depreciation to survive.

“The money they used to spend on fixing fences or plant and equipment they are now living off,” he said.

Many in the industry are pinning their hopes on the WA Dairyfarmers’ Collective Bargaining Group.

The group was formed in December after the Australian Competition and Consumer Comm-ission gave the dairy industry a lifeline by exempting it from the Trade Practices Act and allowed farmers to collectively bargain for prices. It now represents around 80 per cent of WA farmers.

While farmers are operating at below or near cost, deregulation has also failed to generate savings for consumers.

Milk price data obtained from the Australian Bureau of Statistics indicates that prices have actually increased for consumers by about 10 per cent.

Prior to deregulation Perth consumers were paying $1.46 per litre. Prices fell to $1.42 per litre immediately after deregulation.

There has been a steady increase since deregualtion so that by March this year the ABS says Perth consumers were paying $1.60 per litre.

WA Farmers Federation dairy section president and Greenbushes farmer Tony Pratico said WA dairy farmers received the lowest prices of all the milk-producing States.

“The WA dairy industry has hit the crossroads,” he said.

“If we lose more producers it will have a progressively bigger impact on the State’s milk production.

“We will then see more products imported from interstate and over-seas.”

Mr Cutbush said many dairy farmers were either leaving the land or turning to tree farming as a solution.

The Federal Government has provided funding to help regions affected by deregulation through its Dairy Regional Assistance Program.

Administered in part by the Bunbury Wellington Economic Alliance, the Harvest Highway project was developed for WA’s South West region bounding the South Western Highway and stretching from Byford to Manjimup. The money is being used to help promote and foster other economic enterprises in the region.