It’s game on! The Australian dairy industry carve up has just...

It’s game on! The Australian dairy industry carve up has just begun. Dairy farmers must now look beyond the farm gate, not to next week, month or year, but to the next 20 or 30 years from now. We must ask ourselves if we want to own and take back control of our dairy industry or are we happy to do nothing and give it away to foreign multinationals and lose control of our future. The choice is ours, or will apathy win? It’s time for farmers to trust each other and really work together. We need to put past animosities and biases behind us and learn from history. We can and must build the BHP of the world dairy industry. We must believe in ourselves and believe that we can achieve it. We cannot and must not fail. If we succeed we will have a prosperous future and be in a position to control our destiny.

The Australian dairy industry is clumsy and inefficient beyond the farm gate. There is little room for so many players, all fighting to profit from such a small milk pool. In such an integrated and fast changing world, our industry has a myopic inward looking view. It is insular and fails to take advantage of what’s happening in the rest of the world. Like the supermarkets, airlines and the car industry, there are at best room for two major players, not the current five plus majors as well as all the small manufacturers. The Kiwis know this with just one efficient world class dominant processor focussed on the farmer and flexing its muscle against the rest of the world. This is what we need.

The Australian dairy industry is at crossroads. Where are our industry leaders? Why aren’t they talking? No matter what sort of positive spin we put on it, the Australian dairy industry is slowly collapsing and dying due to poor seasons and industry uncertainty, compounded by a lack of true leadership and a well articulated industry plan for the future. Australian dairy farmers are not talking to each other about the future. The Australian dairy industry is not cost competitive when compared to our overseas competitors. It has not, due to its size, invested in new technologies and processes. It is fragmented; it has high cost plants by world standards and is not of world class standard or scale to compete with the rest of the world.

The Australian dairy industry was in a Mexican standoff with regard to industry rationalisation and who will reap the profits from that rationalisation that will and must happen. Bega’s takeover offer of WCB has changed all this. This is a Clayton’s takeover offer, designed to flush out the real players in this game. Barry Irvin is a brilliant corporate strategist. He proved this with what occurred with the Bonlac takeover. He knows that the Bega and Tatura assets will become devalued, stranded and uncompetitive if WCB gets taken out separately by a third party. So he needs all three of them in a nice neat package for a nice, neat exit strategy which in reality, is going to do nothing for a better milk price. Farmers have to remember that without milk these assets are worthless. You have the power to change the outcome back to dairy farmers’ favour. Don’t be afraid to use it. We can build a bigger and more prosperous dairy industry with MG as the foundation stone in this new positive era.

If Australian dairy farmers decide we want to take control of our industry and would like to control this change in our favour there is one simple thing we must do and that is to start moving our milk to the last remaining co-op in Australia. This will automatically start the process of rationalising the Australian dairy industry. There could be anywhere between 10-20c per litre of cost knocked out of the Australian dairy processing sector that can go straight back to dairy farmers in the long term. If we do not so this industry will rationalise in a way that is only beneficial for privately owned multi nationals, not for farmers, purely focussed in taking out profits for their shareholders. We have very little time left to act. We will have nobody to blame but ourselves if we lose control of our future because agriculture and dairy in particular is the new mining industry.

Make no mistake this is achievable if we believe in ourselves. Once we have achieved this, NZ and Australia need to work together long term as a powerful dairy trading block that has the ability to flex its muscle in the international market. Currently we are not working together but rather as competitors.

I believe that Fonterra realises that they do not have a long term profitable future in such a small volume dairy industry. Even with the merged Bonlac and Nestle assets they do not have the critical mass to make it work. It is out of step with its own business model. The reality is, and Fonterra knows this, is that Fonterra Australia is a millstone, that will never truly achieve at the level they want. I suggest that they are looking for a dignified exit strategy that won’t give access to another international player. At the moment they are just protecting their position. If Fonterra wanted to it could buy WC&B and Bega but knows that it will never get its money back from that investment.

Once dairy farmers start moving their milk just watch government sit up and start taking very serious notice of the current dairy industry’s problems and start asking how it can help. Through this mega co-op dairy farmers will have a very powerful voice in Canberra, just like the mining and car industries but we need the critical mass and our industry cannot be fragmented like it is now if it is to grow and become prosperous.

Our nation’s future lies with agriculture. We should have a world competitive advantage but not with the current fragmented and dysfunctional manufacturing sector which is only focussed on its own individual survival and not the industry as a whole. We need to grow our industry into a competitive world force. We can do all of it and control it.

Let’s tell the world our dairy industry is not for sale and we want it back for we are all fools if we do not act now.