Appropriations

Thank you, Mr Deputy Speaker, and congratulations on your new role. I am sure you will bring great distinction to this.

I rise to speak about something that is particularly important: the crisis in the dairy industry in Western Australia today. As of 1 October—that is in just 18 days’ time—four of our dairy farmers, my fellow dairy farmers, in Western Australia will have no home at all for their milk. They have been told by their processor that their contract will not be renewed from this date. And no other processor has agreed or will agree to taking on these farmers’ milk supplies. One of these dairy farmers is a new young farmer, Clayton Minson, who has only just recently bought his dairy farm. He has taken the risk, he and his wife have invested and they are having a go— and yet in 18 days’ time, they will have no home for their milk. Another one is Graham Manning—both ends of the spectrum: the Manning family were actually pioneers of dairy farming in Western Australia, and Graham has produced some of the best quality milk in Australia throughout his time as a dairy farmer. In fact, for the last 16 years his milk has been in the top five per cent in Australia for quality. Yet he will have no home for this topquality milk in 18 days. This also sees him—and us as an industry—losing decades and decades of breeding, and decades and decades of knowledge. And there are others: Dale and Leanne Hanks and Tony and Tina Ferraro and their families; they are the others of the four who will see no home for their milk in 18 days’ time.

How does anybody think these farmers are feeling today? What do they do with their cows in 18 days’ time? What do they do with their milk in 18 days’ time?. If that was you, how would you be feeling? But it does not stop there. In Western Australia, a further five dairy farmers will have no home for their milk from 1 January, and they supply a different processor altogether. All of these dairy farmers are extremely vulnerable because they have a perishable product, one that has to be refrigerated and processed on a daily basis. They cannot store it, they cannot put it away, they cannot put it in a warehouse; it has to be manufactured on a daily basis. But they also have to supply these contracts until that very last day. And as for cows, Mr Deputy Speaker—I know you are aware—you cannot simply flick a switch and turn off the udder of a dairy cow. It does not work like that. As you know, it is a long-term investment, when you become a dairy farmer, and with each set of cows that you raise. It takes 2½ years from the time a heifer calf is born until she comes into the dairy as a milker. It is a two-and-ahalf- year turnaround for that one animal. It is a long-term plan and a long-term investment by dairy farmers.

Given that the majority of milk in Western Australia is used in the domestic market, concerns have constantly been raised with me that the market dominance of the two leading grocery retailers is having a major impact on farmgate milk prices. And of course, what really concerns me with $1 milk is the value that consumers then place on that product. To think of what goes into the production, the processing and the delivery of milk—and to think that it is cheaper than water! When you consider the time, the effort, the expertise and the excellence that goes into producing milk around Australia, to see the value go out of this product—in my mind, it is just appalling. The problem arises from market dominance, whether it is in grocery sales or in any other marketplace. It is that processers and producers cannot negotiate a fair price or terms and conditions for their goods. That is what happens. Processers and producers who are unable to make sufficient returns on capital simply cannot make the necessary investments or maintain their businesses. That is it in a nutshell. An additional undesirable outcome is the reduction—often—of the number of branded products, as well as where they are placed on the shelves. We all know that milk and dairy products in effect lead the consumer through a store to the very back— that is where the refrigerated section is. What else will a consumer pick up, along the way to pick up their milk and their dairy products when they go into to a supermarket?

The crisis in the WA dairy industry was highlighted by the Western Australia Farmers Federation dairy representatives at the dairy symposium held in Melbourne recently. I thank the Deputy Prime Minister, the Minister for Agriculture and Water Resources, Barnaby Joyce, for convening this symposium, because the issue facing Western Australia had not been raised at a national level. The amount of people in that room who had no idea that we had these nine farmers who would have no home for their milk in a short amount of time was borne out. I also want to acknowledge the work of the dairy section president, the newly elected Michael Partridge, who actually ran the debate for Western Australia at that symposium. It was an opportunity to facilitate an industryled discussion, and this is needed to better manage the risk—

Honourable members interjecting—

The DEPUTY SPEAKER: Can I ask the members at the table to be quieter please.

Ms MARINO: Thanks, Mr Deputy Speaker. Obviously the plight of my dairy farmers and industry is not necessarily an issue for those on the opposite side.

We need to better manage the risk along the dairy supply chain, given the vulnerability, the perishability and especially the effects of world dairy prices. This meeting saw producers from many states raise concerns about the way milk is sold and the management of processing and marketing. Fairer contract terms were discussed and there was a strong desire to see the processing sector work cooperatively with farmers to agree to better bargaining and contracting conditions.

In my view the long-term outlook for the dairy industry in WA is positive. We know that global dairy consumption is growing by around 2.2 per cent a year. We just have to keep our critical mass in Western Australia. I think we are down to around 145 dairy farmers, yet Western Australia is so well geographically located to supply quality product to developing countries. Our WA processors have an important role and a vested interest in ensuring local milk production capacity is retained for that inevitable time when domestic consumption once again outpaces supply and, of course, for additional export opportunities ahead.

As a dairy farmer myself, I knew we had a problem when Fonterra sold the profitable brands and therefore reduced the manufacturing opportunities in WA—for instance, Lady Borden ice-cream. You are well aware that the dairy industry underpins small towns and local economies. For many years in this country dairy has been rock-solid in the way it contributes to small towns, particularly through my south-west. Australian dairy is a $13 billion farm, manufacturing and export industry. It is not a small player. We look at all of the careers not just on-farm that go with cows: in the food service sector, in research and development, in the vet industry, in herd recording and right through to in manufacturing and the creation of new products. There is career after career. Many of those, as you would know, are city based. So there are some very genuine reasons that this industry is so important in Australia.

The government has commissioned and announced a review by the ACCC. An in-depth and independent inquiry by the ACCC is probably the only way to uncover inefficiencies and inequities that our farmers face and to identify a way forward—as long as those in the supply chain can give their evidence in confidence without the prospect of retaliation from powerful organisations further along the chain. This has been a problem historically. It was a problem when I was working for the industry with Dairy Western Australia. The very nature of the evidence, in such a small market, naturally identifies its source and, because there are limited outlets for the product, that evidence can put you out of business. I had a personal experience of this some years ago when I was given evidence of four potential breaches of the act to pass on to the ACCC. The individual concerned would only meet me to pass on this evidence in a car park in Perth where there were no cameras.

The ACCC inquiry that we have announced will begin in November. It will investigate the sharing of risk along the supply chain, supply agreements and contracts, competition, bargaining and trading practices in the industry, and the effect of world and retail prices on profitability. It will release an issues paper and engage with stakeholders through public and private hearings and will finally report to government in the second half of 2017.

The ACCC’s agricultural unit, which was established through an $11.4 million commitment by the coalition government in the Agricultural competitiveness white paper, will lead the inquiry. I would suggest that a starting point for the review should be the examination of similar legislation in other countries, including the USA, UK and EU. Of course, we need to discover whether the practices currently found in the Australian grocery sector could potentially breach the laws as they apply in those countries. The review needs to consider whether the current law and competition policy reduce incentives for processors and producers to invest and innovate because they are subject to unduly harsh bargaining practices from big players. It needs to consider whether the remuneration structure for buyers and the dominant grocery retailers drive unreasonably aggressive bargaining practices.

I want to finish this particular speech by recognising where those four dairy farmers find themselves. I spoke about it earlier on and I know how they are feeling. I know how the five and their families, who are yet to have their contracts not renewed in January, are feeling. I also know how strongly they feel about their cattle, their farms and the dairy industry. All of these people have spent decades and decades refining their craft and contributing not just to the industry but to their communities. I want to thank them very much for what they have done. It is an appalling situation that they find themselves in. I hope that everybody in this House acknowledges their vulnerability and commitment to the industry over so many years.