Dairy Reform in Australia — A Producer Perspective

The dairy industry is one of Australia’s major agricultural industries and exports around half its annual milk production as value added products to a wide variety of markets. Mailbox milk prices for Australian producers are solely determined by the marketplace.

Around the world milk is produced with many different farm systems and manufactured and sold in many different forms and markets. This diversity means dairy can adapt and deal with change as it comes along more effectively than many other industries.

Change has certainly been a constant in the experience of Australian dairy farming over the past two decades.

When Australia signed the Closer Economic Relations treaty with New Zealand in 1983, the clear message for local dairy producers was - be world competitive or else. This trade agreement and the subsequent restructuring Kerin Plan exposed Australian dairy producers to commercial market forces in a major way.

However, the industry not only adjusted but has actually improved its ability to respond quickly and profitably to changes in the market environment.

One key to this successful transition was the phased nature of change in government price support measures. Another has been dairy’s willingness, as an industry, to proactively engage with government to shape the process and pathway of reform.
Everyone needs time to understand and successfully adjust to change. Individual businesses (both at farm and manufacturer level) also need some certainty about the market and policy environment in which they are investing.

The reform of Australian dairy arrangements took place over an extended period - 1984 to 2000. This was important. It gave local farmers and processors time to adjust their business models to changing markets and community needs.

The gradual phasing-out of price support measures from 1984 helped the Australia dairy industry realize that it was a globally competitive producer and gave us the confidence to expand milk production and seek new export markets right through the 1990s.

Taking policy ownership of our destiny was equally important. The Australian dairy industry recognised a long time ago that we would do better embracing change and responding to marketplace developments than relying on government support and regulation.

In the late 1990s the remaining Australian dairy regulations came under pressure on several fronts (competition policy, commercial pressures and international trade rules). While change would affect different parts of the industry in quite different ways, the whole industry was able to unite and develop and present a proactive “reform solution” to government.

Industry groups then worked closely with the federal and state governments to conclude the orderly removal of remaining price support mechanisms for both the manufacturing and fluid milk sectors by July 2000.

Facilitating the restructuring process was the $1.5 billion Dairy Structural Adjustment Program (or DSAP) that the federal government put in place. DSAP was funded by a consumer levy on the sale of fluid, including flavoured, milk.

The program, as mandated in the legislation, has since ended.
This package recognized the impact of change on farmers. It helped continuing farmers adjust their operations to compete in the new market situation and allowed others to exit dairying with dignity and a return on their hard work and investment.

In conclusion the dairy industry in Australia has now moved beyond the debate on marketplace versus government price regulation.

Dairy farmers have experienced some challenging times since 2002 because of an unrelenting drought, high input costs (including energy and feed) and on-going rationalization at the farm and processing levels.

The climate debate has added a new dimension to these challenges.

Even so, we believe that aligning our businesses to the marketplace is essential to our long-term viability and profitability. Being proactive in the more complex policy debates and community discussions on climate and sustainability will also be important.

However, given our track record in adapting to change we feel we have a good chance of continuing to build on our past success.

Allan Burgess is president, Australian Dairy Farmers Limited and chairman of the peak policy council, the Australian Dairy Industry Council.

Cheese Reporter welcomes letters to the editor. E-mail your comment to Dick Groves at dgroves@cheesereporter.com.

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