Dairy News Australia September 2015

Say goodbye to $6/kgMS PAGE 8 UNITED FRONT Queensland sector gathersPAGE 6-7

SEPTEMBER, 2015 ISSUE 62 // www.dairynewsaustralia.com.au

SHAKY GROUND

Could 10 years of work on the China Free Trade Agreement be about to unravel? PAGE 9

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NEWS // 3

NEWS .......................................................3-11

AROUND THE REGIONS ..............12-13

OPINION .............................................. 14-15

MARKETS ........................................... 16-17

MANAGEMENT ................................18-19

ABVs ....................................................20-25

ANIMAL HEALTH ..........................26-28

SPRING PASTURE ........................ 29-31

MACHINERY & PRODUCTS ...................................... 32-34

Kim McKeans 50 year career in dairy has been officially recognised. PG.10

Meet Australias new top bull. PG.21

Gippsland farmer Marian Macdonald says farmers need more support to tackle climate change. PG.15

TO PAGE 4

Set limits on foreign investment says Vic MP

A VICTORIAN MP wants farm land to be treated like a national treasure and protected from foreign investment amid plans for Chinese investors to buy up to 70 dairy farms.

Upper House MP for Western Victoria, James Purcell, from the Vote 1 Local Jobs party, said Linear Capitals proposed purchase of up to 70 farms in the region would be a disaster if they succeed or a total disaster if they fail.

However, the states major political par-ties have backed foreign investment as an impor-tant part of developing the states food industries.

Aerem, a new dairy

company in which Linear Capital is an investor, is looking to purchase 50-70 farms in western Victoria and south east South Aus-tralia.

A Linear Capital spokesperson said the project represents an opportunity to secure long term jobs and economic benefits for the region. We are continuing to talk directly to farmers and investors to progress it, the spokesperson said.

The process has taken longer than the company would have liked but we have strong support from farmers and strong inter-est from investors. Were now working to finalise those investment arrange-ments, she said.

But Mr Purcell, who has raised the issue in state

parliament, says there is widespread concern in the community about foreign ownership and sketchy details about who is back-ing the investment plan.

I think there are two options with large foreign ownership one it will work and it will be a disas-ter because we lose the capacity, the jobs and the structure of the agricul-ture industry.

The second one is that it doesnt work and they will put all of these farms on the market in one whack. If it works its bad; if it doesnt work its worse.

Mr Purcell said there was a great deal of uncer-tainty in the region about the plan but farmers expected to have offers in the next month and many

were keen to sell.The majority of them

are still expecting it to come off, Mr Purcell said. I dont know whether its hope or real expectation.

Mr Purcell said farmers were being tempted by the offer of good money.

He said both state and federal governments could play a role in stopping for-eign investment in farm-ing land.

I think you need to start with simple ways to stop it happening, such as finding out how much is currently owned, he said.

Mr Purcell said the For-eign Investment Review Board should review the amounts that can be pur-chased and set limits.

Both state and fed-eral governments could act. The state can restrict

it by doing such things as charging additional stamp duty.

Although his main con-cern centres on the Linear proposal, Mr Purcell is worried in general about foreign investment.

If you do enough one-off sales they all build up. In my mind, you really just need to stop it altogether.

However, he conceded farmers wanting to leave the industry might have no other option but to con-sider foreign buyers.

The issue at the moment is where do farm-ers sell their farms if they dont sell it overseas? We havent got a structure where the banks know how farms work. We need a rural bank to lend to

RICK BAYNE

Brian and Michele Lawrences Jersey-style crossbred herd in Meander, Tasmania, has grown from 460 in 2007 to 1000 head today. Read about their hard-earned success on p.18.


4 // NEWS

Set limits on foreign investmentFROM PAGE 3

Victoria open for investment but not at any cost: VFFVICTORIAS FARMING leaders are welcoming foreign investment in dairy properties but have sounded a word of caution about plans for a major sell-off.

Amid controversy about a proposed big buy-up of land in western Victoria and a disputed planning application in Gippsland, the leaders say foreign investment is needed for the industry to grow and compete on the international market.

Victorian Farmers Federation president Peter Tuohey and United Dairyfarmers of Victoria president Adam Jenkins both say that foreign investment is good, especially if Australian investors are reluctant to commit to dairy.

However, Mr Tuohey has reservations about plans for one Chinese-based investment company to buy 50-70 dairy farms in Western Victoria, and Mr Jenkins said a proper framework was needed to make sure it is the right investment for the right situation.

Mr Jenkins also lashed out at the hysteria around foreign investment, saying it misrepresented an industry that was built on decades of international investment.

Mr Tuohey said agriculture needed to look at foreign input because were not getting the investment from Australian investors.

Thats where farming is struggling, he said. We need the extra capital to get more processing and extra investment in farms.

Mr Tuohey said he was uncertain about how the proposed purchase of up to 70 farms by Linear Capital would work.

When you look at the Western

District, Im not sure how the model will work because there are a lot of individual farms. I did meet with one person involved and it seemed pretty good, but it seems very complicated.

Mr Tuohey said he had some concerns about so many farms being sold at once. I understand some of that money is supposed to be 50% Australian and the rest foreign capital, but I dont know if that makes it any better.

He said the deeper issue that should be considered was why so many farmers were looking to sell.

The question is if the money is that good that theyve all decided to sell, or have they all just had enough? If youve had enough and want to retire, you want to get the best offer. Do those farmers say no to foreign investment and continue on?

Mr Tuohey said he understood most farmers selling to the foreign investor would stay on as farm managers.

That means theyve still got involvement and their families arent

going to go anywhere. The important thing is that there is going to be some processing on the back of it, meaning there would be more money spent locally.

The extra capital will come into the area and help improve it.

Mr Tuohey said the register of foreign investors would help to keep track of sales so we can manage it in the future to make sure it doesnt get out of hand or become something we dont really want.

Mr Jenkins said the UDV welcomes investment, regardless of whether it is foreign or local.

Our industry has been built on investment from outside. Currently a lot of our processors are foreign owned. We welcome the investment because we need the capital in our industry to make sure we do compete on a global scale.

The dairy industry relies on international trade and so when we strike multilateral and bilateral agreements, and free trade agreements, with our trading partners we understand foreign investment is part of the equation.

But he too had added riders.It needs to be the right investment

for the right situation and we need to make sure the framework for that investment ticks all the boxes from

environmental, community and farming standards and protocols, he said.

Mr Jenkins said he doubted the quoted 70 sales would eventuate.

I doubt 70 farms will come off. I think the dad and mum 250-cow to 350-cow farm is still the bread and butter of our industry. Weve seen time and time again that thats the model that succeeds.

The UDV president said: From a UDV point of view, who are we to

stop someone retiring or moving on? If the framework is in place federally, then we should not have a problem.

Mr Jenkins added he understood that if the farms sold they would mostly be run by Australian managers.

We welcome foreign investment but it has to be the right framework to make sure its a win for the community,

the farm and the investor, he said.Mr Jenkins said the UDV would

work with industry and government to make sure the right signposts are in place.

We need a framework in place so investors know the local requirements. Weve got to make sure processors are on board, Dairy Food Safety Victoria, Dairy Australia and the State Government can lead them through the types of investment and how to welcome their investment rather than stifle it.

We welcome foreign investment but it has to be the right framework to make sure its a win for the community, the farm and the investor. Adam Jenkins, United Dairyfarmers Victoria

RICK BAYNE

people to make a lifetime commitment to the land.

Victorian Minister for Agriculture and ALP Upper House Member for Western Victoria, Jaala Pulford, said foreign investment played an important role in supporting the states food and fibre industry.

With the growing middle class in Asia and increased demand for our high quality, fresh, clean, produce there is an enormous opportunity for growers and producers to tap into these new and emerging markets, Ms Pulford said.

Food and fibre has been identified by the Andrews Labor Government as one of six key sectors for future economic growth, and as part of this we need to support the sector to develop new and innovative farming practice, she said.

Foreign investment plays an important role in supporting our food and fibre sector here in Victoria, however its also important to ensure that we get the balance right between supporting and growing our vital agricultural sector and land users, and also providing the right opportunities for growth, planning and housing development in our regions.

We recognise that as our cities and towns expand, and populations continue to grow, land use will play a significant role in this ongoing discussion.

Ms Pulford did not buy into the Linear Capital proposal.

Any negotiations currently occurring between local dairy farmers and Linear Capital are a matter for the individual farmers and Linear Capital, she said.

Ms Pulford said concerned farmers can seek free financial advice from the Rural Financial Counselling Service.

Victorias opposition agriculture spokesman, Peter Walsh, said joint venture investments should be explored.

The increase in demand for dairy products out of Asia, particularly China, bodes well for the future of the industry and if investment in joint ventures in Australia leads to greater market access and increased returns for farmers, they are opportunities that should be explored, he said.

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NEWS // 5

A DAIRY agistment farm in south-west Victoria has been purchased by a major Chinese investment group to raise heif-ers for the Chinese market.

Tianjin Bright and MengDe Dairy Group, which operates one of Chinas biggest dairy networks, has bought the 365ha farm at Bra nxholme south of Hamilton and initially hopes to run about 700 heifers on the farm and build numbers over time.

Lets Go (Australia) sales and market-ing director Jason Hellyer, who helped to broker the deal, said it was purely a grazing farm.

It has no dairy infrastructure and was set up as an agistment property, which was perfect for their needs, Mr Hellyer said. They dont have any intention of establishing a dairy facility, their long-term plan is export and having access to quality animals.

The owners are calling on Australian expertise to manage the business.

Local farmers James and Nicole McCarroll have been employed as farm managers and an Australian-based farm management team is supervising and providing background advice.

They were very keen to engage Aus-tralians wherever possible, Mr Hellyer said.

They are dairy farmers themselves but they realise they dont understand Australian conditions and that its

important to heed local advice.Mr Hellyer said the investment was

good for the local Victorian economy.I dont see any fear factor in it, he

said. When we have these opportu-nities to work with a foreign country in terms of export opportunity or eco-nomic growth, I think we should look seriously at it.

China is 55 times bigger than Aus-tralia. Theres massive scope in the market but its a competitive landscape and wed be kidding ourselves to think that the Chinese are just gravitating to Australia. There are a lot of other coun-tries ahead of us. Were just one of many countries competing in this space.

The investors looked at about six properties west of Melbourne but didnt want to buy a farm with expensive dairy infrastructure.

This was a great location close to Portland, gets reasonably good rain-fall and it had no dairy infrastructure. Theyre not about buying something thats got money tied up in infrastruc-ture theyre not going to use.

The heifers will be exported from the Port of Portland.

This is the groups first foray into the Australian market and Mr Hellyer said they wanted the ability to control access to quality animals.

Historically the quality of animal you get in the import market into China

is not the best so they are investing in doing their own thing with a view to securing a better quality animal, Mr Hellyer said.

I dont think its going to be diffi-cult for them to get into the market. They will be working with capable Aus-tralian people who will provide a reli-able product. Theyve done their due

diligence and have been planning it for two or three years.

Mr Hellyer said the investment group hoped to buy more grazing properties.

They have long term plans to buy more, provided this exercise is viable and profitable and they can establish a supply chain into the Chinese market, he said.

Once theyve completed the export process a few times they will assess how it has gone and if its got upside the indi-cations are they will look to expand the operation, whether it be direct pur-chases or through joint ventures with local producers.

It is understood the farm was sold for about $2 million.

Local knowledge vital to Chinese heifer export plan

Jason Hellyer (left) with James and Nicole McCarroll who are the farm managers employed by Tainjin Bright and MengDe Dairy Group to run the Duncraig farm.

TO PAGE 11

YoYou dairy expansion a no go for now

A CATTLE barn and milk processing plant proposed for Kernot in eastern Vic-toria has been rejected as an over-intensification of the land.

In refusing YoYou Dairys proposal, the Bass Coast Council said the development did not sit comfortably within the natural landscape of the area.

The council stressed its decision had nothing to do with foreign ownership or animal welfare issues.

However, United Dairy-farmers of Victoria presi-dent Adam Jenkins said the hysteria surround-ing foreign investment had resulted in inconsistency of shire planning that is not helpful to an industry that needs to grow.

YoYou Dairy is an Aus-tralian subsidiary of China based Ningbo Dairy Group and has bought three

properties in Gippsland, including two at Kernot, in the past few years. It plans to export fresh milk bot-tled on farm to Chinese and Australian markets.

The Kernot application sought to double the herd size and install a free stall barn and a bottling plant.

Bass Coast Mayor Cr Kimberley Brown said the council considered the size of the proposal and believed it was incompat-ible with its surrounds and would negatively impact on the Kernot townnship.

The council also felt that the application, which requested 1000 head of cattle be kept on the land, was an over-intensifica-tion.

However, she stressed that issues of foreign own-ership and animal welfare were not factors in coun-cils decision.

Council consid-ered the proposal would adversely impact the local community, Cr

Brown said.Foreign ownership is

governed by the Federal Government, and animal welfare legislation is gov-erned by the Victorian Government.

Cr Brown said the application was consid-ered to have not demon-strated that the proposed cattle numbers would fall within the definition of extensive animal farming; where the animals feed must mainly be grown on the land.

The council also believed the application failed to address the man-agement of stormwater, with particular concern raised about effluent run off impacting the Bass River system. The location of manure and compost storage areas was consid-ered to be too near to resi-dential properties which surround the site.

Ningbo Dairy Group vice-president Harry Wang has previously said

RICK BAYNEthe group had purchased three farms and was look-ing to invest in more.

He said Australian dairy had a good name that appealed to Chinese consumers and the com-pany wanted to export

heifers and hay to increase quality of milk in China.

Mr Wang said the com-pany had $10 million ready to invest.

He could not be con-tacted for response to the councils decision. How-

ever, it is understood an appeal to VCAT against the council decision will be considered.

The councils gen-eral manager sustain-able development and growth, Allison Jones, said

there had been no indica-tion from the applicant. Theyve got 60 days to ask VCAT to review the decision, she said.

The proposal drew sig-nificant community anger,

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6 // QUEENSLAND DAIRY CONFERENCE

Asia is there for the taking but its not easyASIA MAY not be far from Queenslands doorstep but the challenges of catering to the export market are great.

Norco deputy chair Tony Wilson said the road to China had not been easy for the company.

The tyranny of distance is still a challenge for Australia, however the size and scope and proximity to Asia cannot be ignored, Mr Wilson said.

In the past 12 months, Norco has managed to set up systems so that fresh milk is sent to China within seven days of production. Work was done to achieve faster regulatory and logistics access, as well as a direct selling trialled online.

The cooperative also developed a smart phone app that allows customers to trace information on when it was packaged. It will also include informa-tion about where the product was made.

Slowly but surely the potential in China is being realised, Mr Wilson said.

Norcos sales in China had growth ten-fold in the past year and there was more to come, he said. The Norco brand is now available in many tier-one cities in China.

Bruce Warren, head of agribusiness company Japfa Comfeed, told the audience the opportuni-ties in Indonesia are immense and that Australian producers needed to be bold.

Unless we jump in boots and all now, were going to be left behind, he said.

Mr Warren, whose Greenfields milk is produced in Indonesia, said getting to know the culture of each Asian country was critical to success. His approach was to blend and bend.

We need to be creative but you really need to understand your market.

He likened the Australian dairy sectors business with supermarkets to an abusive relationship that the industry should walk away from and look else-where. Why put up with $1-a-litre milk when you can go and get a niche market in Asia, he said. Aus-tralia will never feed all of Asia, but we can feed the rich ones.

Dairy products squeezedLION DAIRY and Drinks manag-ing director Peter West had a sober-ing message for dairy farmers about the effects of Woolworths and Coles house brands on the price of milk and dairy products.

The prices I get today will be lower next year, they will be the lower year after, and the year after. I can guarantee you there will be five years of price deflation when it comes to the price that we go into the marketplace.

He said a strategy of pursuing growth opportunities and cutting costs was driving Lions response, highlighting that consumer trends towards full fat milk, butter, coffee and natural products was great for the sector.

DARE iced coffee now outsells Coca-Cola in convenience stores, he said. This is a market in a period of enormous change and transition

(and) is very much the future of a more vibrant dairy industy.

He said the need for authen-ticity in products supported by the governments new country of origin labelling laws will also bode well for Australian dairy, but urged a word of caution about China as the saviour of industry.

The opportunities are there but it will be volatile and it will be harder than everybody thinks. This market is hugely sophisticated and competitive.

The company has also launched a new Milk Matters campaign to remind local consumers of the effort that goes into producing a litre of milk.

We want people to re-think all of the work that went into that product, and we do want people to have an emotional reaction to the things that they take for granted -

of your hard work, everything that is required for this product that in many cases can be bought more cheaply than water and think, is that right?

The company has also cut bud-gets and staff, and offloaded its cheese businesses, in an unrelent-ing effort to reduce costs.

Mr West said a strong focus on mutuality supporting farmers to be viable and successful was also a focus of their approach and the company was looking at ways to help their suppliers reduce costs, such as bulk purchasing for energy.

We all want to see the notion of a fair price. There will always be a tension of about how much that is, but our aim will always be to pay the maximum that we can afford, he said.

Parmalats Steve Oldridge also highlighted his companys

new measures to support farmers saving on production costs includ-ing bulk energy and feed programs, as well as benchmarking tools and increased communication with farmers. He said the company was looking to ensure their suppliers had sustainable profit margins.

Because theres no greater advocate for our company than our suppliers, he said.

There was a mixed reaction to the presentations from farmers, many of whom are frustrated the key role $1-a-litre milk is playing in devaluing the entire market, yet there seemed to be nothing anyone can do about.

Ninango farmer Bevin Black offered this advice to processors in relation to supermarkets: I think its time the fellas started to kick their (supermarkets) backsides, not lick their backsides.

Lion Dairy & Drinks managing director Peter West with Norco deputy chair Tony Wilson, QDOs Wesley Judd, and Parmalat national manager, farm sustainability and communication, Steve Oldridge.

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THE QUEENSLAND dairy industry is on the cusp of renewed growth driven by the opportunities of an increasingly affluent Asia - or it is hanging on by a thread as increased production costs and tighter margin force more farmers to leave the local industry.

Its this range of views that were canvassed at

this years Queensland Dairyfarmers Organisation (QDO) conference jointly held with the Queensland branch of the Dairy Industry Association of Australia (DIAA). The conference theme Dairy Without Borders highlighted the breaking down of national and regional borders that were opening international markets as well as exposing the sector to increased competition from down south.

QDO president Brian Tessmann said the industry needed to think longer term than it had in the past, but this was undermined by the immediate challenges of increased inputs cost and low farmgate prices that threatened their short to medium term profitability.

He called on state and federal government to back the local industry.

Governments need to decide: do they really want the jobs that the industry

provides now, and the industry can provide in the future, which is a real promise.

Are they going to back the dairy industry or are they going to back other players in the economy, against us; are they going to back the supermarkets, or union self-interest?

Are they going to back the grain industry, or the beef industry? Are they going to back them, or are they going to help the


QUEENSLAND DAIRY CONFERENCE // 7

Asia is there for the taking but its not easy

Farmers hanging on and looking forwardMADELEINE BRENNAN

Dairy News Australia asked some of the delegates at this years conference: What is the biggest challenge facing Queensland dairy farmers?

The cost-price ratio has changed. Queensland is the only state doing less than 1 million litres per farm and this reflects what the current best option is. And we are the only crazy people milking ice-age animals in the tropics. - Peter Watson, Conondale

The rising costs it takes to keep farming, electricity, the cost of grain. $1 a litre milk is killing us. Its an unfair market. - Lisa Rozynski, Imbil

Theres not really one burning issue. Perhaps its our relevance and size. Were diminishing and so too is the economy of scale. Andrew Burnett, Gympie

Accessing services. Because were spread out more and more, theres not enough local suppliers mechanics, machinery agents, silage contractors. They are either not there or you have to wait forever. Mal Lanham, Conondale

dairy industry battle the challenges weve got? Mr Tessmann said.

He said at a federal level, the recommendations of the Harper Review and the China FTA needed to be implemented. We need to reduce our costs. We can be competitive at a local and an international level but we need to have the costs structure addressed.

As an example, he said energy policy was failing farmers, drawing comparisons with the electricity situation in California, where renewables had delivered cheap energy.

A monthly bill for a couple with air conditioning amounts to $14 a month. This low electricity is what we are competing against.

DIAA Queensland president Allan Box said Queensland was lucky it was relatively isolated from the turmoil of the global dairy auctions but were kidding ourselves if we dont think we are going to be affected by low commodity prices in the long run.

Opportunities both local and regional for Qld dairyMINISTER FOR Agriculture and Fisheries Bill Byrne said the Palaszczuk Government is focused on supporting the states farmers explore new markets in Asia.

Speaking at the QDO-DIAA joint conference, he said the government, through Trade Investment Queensland and the Department of Agriculture and Fisheries, was working to develop detailed product reports in the wake of recent free trade agreements in Japan, Korea and China.

The role for government is to try and smooth the path for industry to explore those opportunities, Mr Byrne said.

He said while beef was the focus of his recent trips to China and Indonesia, the opportunities for dairy and horticulture were self-evident.

He added the government

was establishing a rural jobs and skills alliance to develop skills and address labour market challenges.

Dairy Australia analyst Norman Repacholi, also speaking at conference, agreed that building capability was critical if the Queensland dairy industry is to capture export opportunities.

He recognised the challenges in the market at the moment, and said the Dairy Australias Northern Dairy Industry Strategy - which was prepared with representatives across the value chain - was critical to outlining a pathway for the sector which had been under the pump since deregulation.

However, Mr Repacholi was keen to highlight the opportunity and prosperity that remained in the state.

There are just as profitable farms in Queensland as there are

anywhere else in Australia, he said.He said opportunities for

growth existed both domestically and in the region, but that each country needed to be targeted separately according to their unique requirements and culture.

He also added that while producing for export markets was important, volatility meant producers had to factor in risk.

Youve got to consider, how much return can you make if the price you are being paid is less than the domestic market?

He predicted growth in Australias milk production would drop off next year in response to global oversupply but still grow by about 1.5%.

Queensland production dropped 6% last year, and has dropped 2% to last year, according to latest figures.

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8 // NEWS

AUSTRALIAN DAIRY farmer hopes of achieving predicted price step-ups look like being hit for six.

The early predictions of a $6/kgMS or a slightly better final price are look-ing shaky, with proces-sors and industry experts now expecting the opening price of $5.60/kgMS to be closer to the mark.

Australias major dairy processors have had their profits sliced and global markets arent recovering as quickly as expected, but a falling Australian dollar

and strong competition should protect farmers from potential price cuts.

The biggest processor, Murray Goulburn (MG), says it is confident that a global supply response is starting to emerge as a result of the low dairy commodity price environ-ment.

MG had opened at the trend-setting $5.60/kgMS and predicted an end-of-year price of $6.05/kgMS.

Fonterra Australia advised its farmer suppli-ers late last month that it has placed its farmgate price and forecast clos-ing price range for season

2015/16 under review, with managing director Judith Swales saying the outlook remains very tough.

Despite this, a more favourable exchange rate and initiatives to miti-gate the impact of lower commodity prices has led MG to maintain $6.05/kgMS can be achieved if dairy commodity prices strengthen.

However, they concede this remains subject to cer-tain assumptions including strengthening of commod-ity prices, foreign exchange and other risk factors. If these factors do not mate-rialise, MG says its price

is more likely to be in the range of $5.60 - $5.90/kgMS.

Dairy Australia industry analyst John Droppert said it was clear Australian processors were questioning what they can afford to pay and whether their forecasts are still reasonable.

But while some have raised the potential of a step down, recent market movements presented conflicting signals.

A step down has been canvassed but thats an extreme measure thats only happened twice before, the last being

Its a very challenging market at the moment and a lot of dairy companies internationally are saying their forecasts have been a bit optimistic. At least our farmers can be prepared. John Droppert, Dairy Australia.

New warning to farmers: dont expect to get $6/kgMS

during the global finan-cial crisis. Things would have to stay bad for longer for that to happen, though given current milk price forecasts assume a recov-ery in commodity prices, its not outside the realms of possibility, he said.

Mr Droppert said signals were also mixed between pro-cessors, with some more bullish in predictions of slight increases compared to others who raised the possibility of reducing the opening price.

He added that the early signals would help farmer planning.

Its good to be having the conversation early. In the GFC, the step-down came out of the blue for farmers and they didnt see it coming.

Its a very challenging market at the moment and a lot of dairy companies internationally are saying their forecasts have been a bit optimistic. At least our farmers can be prepared.

Mr Droppert said Aus-tralias extra value-adding capacity, strong domestic market and weak currency were protecting the price.

He added that senti-ment was a wildcard on the market. The last global dairy trade price went through the roof and the

futures pricing indicates the next one will go up as well.

Were still seeing a lot of reasons for prices to stay weak: weve still got over-supply internationally and

demand is fairly lacklustre, yet prices on global dairy trade are going through the roof. Theres a real conflict there. At some point they have to converge.

It is a murky picture but we keep coming back to this supply and demand issue and saying its a good idea to be prepared.

Rabobank International dairy and farm inputs senior analyst, Michael Harvey, said the market looked to have bottomed out but he was cautious about the recovery time.

Were still cautious about expecting a recovery in the next six months, Mr Harvey said. We think

it will turn in the next 12 months but its still a few months away which is problematic for Austra-lian exporters because it remains a very weak com-modity market through the

key production and selling season.

Mr Harvey said factors influenc-ing the slow recov-ery included strong supply in Europe, a continuing ban in Russia and declining Chinese import vol-umes.

His advice to farm-ers is to prepare for a $5.60 to $5.90/kgMS final price.

At $5.60 farmers are only marginally profitable but it could

be much worse given the global market, he added.

Commodity prices are as low as theyve been in 12 years. Its caused signif-icant stress in New Zea-land; fortunately weve had a weaker dollar and strat-egies by the exporters to reverse some of that down cycle.

Mr Harvey said compe-tition among processors was leading to aggressive pricing which is good for farmers but problematic for processors because they are paying a much higher price for some of the milk and selling into markets that dont justify the price.

RICK BAYNE

BOOKING DEADLINE: September 30 MATERIAL DEADLINE: October 6 | PUBLISHED: October 13CONTACT: CHRIS DINGLE T: 0417 735 001 E: [email protected]

TRACTORS & MACHINERY & ATVsNext months special report reviews the latest developments and news from the farm machinery sector; the hardware that makes the modern farm tick. Well focus on equipment thats relevant to dairy farming no big broadacre gear reviews, just gear that helps the dairy industry farm smarter. Watch out for it in the October issue of Dairy News Australia.

NEXT ISSUE: OCTOBER

SPECIAL REPORT

Dai ry NewS aUSTraLia september 2015

news //9

Union claims threaten China deal

AUsTRALIAsAgRI-cULTUReleaders are increasing the pressure on Canberra to officially approve the China-Austra-lia Free Trade Agreement (ChAFTA) before the end of 2015, amid an escalating political stoush about the potential impacts of the deal on Australian work-ers, spearheaded by the union movement.

The multi-billion dollar deal, which took 10 years to negotiate, was rati-fied in June but requires a formal process of endorse-ment by the Joint Standing Committee on Treaties (JSCOT), due around October 19.

A second inquiry by the Senate Foreign Affairs, Defence and Trade Refer-ences Committee will also deliver an assessment of the deal within one month of the JSCOT.

Labor MPs, includ-ing trade spokeswoman and leader of the opposi-

tion in the senate Penny Wong and shadow agri-culture and rural affairs minister Joel Fitzgibbon, have recently called on the government to fix the agreement by ensuring temporary migration pro-visions did not put local jobs at risk.

Senator Wong told Adelaide radio: We know, for example ... that the (current) testing that is making sure the job is offered first to an Aus-tralian who can do it, is removed in relation, for example, to people who have trade qualifications. Now that is a problem.

The potential for con-cessions to be granted so that temporary workers do not have to comply with all Australian laws and reg-ulations, including rates of pay and workplace safety, is also causing concern for the labour movement.

Senator Wong told the ABC that Andrew Robb had brought home an agreement that presents risks that we have to find a

mAdeLeInebRennAnway through.

The National Farm-ers Federation (NFF) has joined the chorus of voices - including the Australian Dairy Industry Council, the Minerals Council and the Australian Chamber of Commerce and Indus-try - urging politicians to endorse the agreement before it undermined con-

fidence and cost jobs.NFF chief executive

Simon Talbot said the FTA agreement was an amaz-ing milestone for Aus-tralia, worth $9 billion in farm-gate returns across the country, and must be ratified before the end of the year.

Australian Dairy Indus-try Council (ADIC) chair

Noel Campbell said imple-mentation this year would mean the elimination of tariffs on Australian dairy products to China worth about $60 million.

He said the ADIC expects about 600-700 jobs would be created within the first year of rat-ification, with flow-on effects benefitting rural

and regional communities.Minister for Trade and

Investment Andrew Robb said it beggars belief cer-tain union officials would be leading a campaign to white-ant these kinds of opportunities and called on Opposition Leader Bill Shorten to stop doing the unions bidding and start putting Australia first.

Mr Robb said if Labor seeks to obstruct this deal, China would walk away and pursue other opportunities with competitors in places like South America.

This would be a dread-ful outcome for our econ-omy and Bill Shorten would be solely responsi-ble, Mr Robb said.

wheReTofRomheRefoRThechInAfTA?

Before ChAFTAs entry into force, both Australia and China must complete their domestic treaty-making processes.

The Joint Standing Committee on Treaties (JSCOT) is conducting a public inquiry into ChAFTA and will table its report in Parliament, expected in the week beginning October 19.

The Senate References Committee on Foreign Affairs, Defence and Trade will also report within one month of JSCOT. The same process was followed for the Korea agreement.

The primary function of these committees is to determine whether the treaty (in this case the ChAFTA) is, on balance, in the national interest. The recommendations of the committees are non-binding on the government and there is no scope for changes to the text within the negotiated agreement. A change in the wording of the agreement would involve renewed negotiation, which China may or may not agree to.

After the JSCOT report is tabled, Parliament would enact amendments to relevant legislation. These amendments relate to changes to the legislation including Customs Tariff Act 1995 and the Customs Act 1901.

Prime Minister Tony Abbott and Minister for Trade and Investment Andrew Robb signing the free trade agreement with Chinese President Xi and Minister for Commerce Gao Hucheng.

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10 // NEWS

FIFTY YEARS is a long time to work in one indus-try, and long enough time to witness a fair amount of change.

Thats certainly been the case for Kim McKean, manager of the University of Sydneys dairy operation at Camden, who recently received the Dairy Science Award from the Dairy Research Foundation in recognition of his service to the industry.

He started as an animal attendant in 1966 and over the decades has trained thousands of veterinary and animal science stu-dents in practical animal

husbandry, as well as pro-vided on-the-ground sup-port for more than 100 masters and PhD students.

He is currently helping to oversee the implemen-tation of the universitys Corstorphine farm robotic rotary dairy.

When I started we were milking in a little six bail walk-through dairy, putting the cups on the cows and washing the cows with an old cloth, he said.

I never thought Id see robots milking the bloody things but here we are, its amazing. The university campus has five farms over 350ha with 360-380 cows milked.

In August last year, the farm transitioned from a

40-a-side double-up her-ringbone system to the automatic milking system developed by the univer-sity in partnership with Swedish company DeLa-val, the NSW Department of Primary Industries and Dairy Australia.

The robotic rotary has an internal, rotary her-ringbone platform, with cows facing outwards and the robots housed in the centre.

The system performs the tasks of teat-washing and drying; applying the milking cups; cup removal; teat disinfection and cup flushing. It also monitors milk yield and quality. Commercial versions have a capacity of 90 cows per hour depending on

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From rags to robots: 50 years of service to dairy

the number of robots installed and the day to day operational procedure applied. The throughput potential of the dairy is 1500-1600 milkings per day meaning that the equipment could milk up to 800 cows twice a day.

Mr McKean said it had been a steep learning curve since they first started using the system in August. Im not particularly computer literate, although I am now apparently, he laughed.

Its been a pretty chal-lenging 12 months, but weve got it going and its working pretty well at the moment.

He said the cows had settled into the new way of milking within a couple of days but they took longer to adjust to the voluntary cow traffic.

Ive always known animals are not stupid but this has reinforced just how smart they are. It only takes a couple of days for them to work out the new system. And from an animal welfare and cow comfort point of view the system is fantastic, because the cows move to the milking system voluntarily.

The cows movements and eating patterns are monitored and tracked, and they are guided through designated gated areas to the milking area, knowing there is more food once they are milked.

They love it, he said. Theres no pressure on the cows, theres no one yelling at them, they are

not being jammed up in yards with lots of other cows. Its really good from that point of view.

Mr McKean said his biggest challenge adapting to the new technology was surrendering management to the system and trusting it to do the job.

Theres also the fact that someone has to be available to monitor the system, not necessar-ily be in the dairy, but to be available to take auto-mated phone calls from the system and to attend if

there is an issue that needs addressing.

That may mean a phone notification in the middle of the night to attend to a problem.

But the upside is, we start at 6am now and not 3.30am .

He said 90% of the herd came over to be milked during the night.We only get about 50-60% during the day and thats because we do a lot of teaching of vet students here, he said. Its not the most appealing place

to come (as a cow) when there is a high risk that you will be poked and prodded by a heap of students.

Mr McKean said adjust-ing to the robotic system had so far not made his life easier but that he can see it will as they get better at using it.

Its definitely the way of the future theres no question about that.

On the issue of his award, Mr McKean said he was embarrassed but honoured to receive the recognition, and he loved his job and the team he worked with.

Ive had a huge amount of support over the years, he said. And I like cows.

Im enjoying them even more, they are get-ting even quieter since the new system came in. At night you can wander round quietly with them, and they dont care. Ive thought some of them were dead they were that quiet you have to give them a little shove just to realise they were just rest-ing.

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NEWS // 11

FROM PAGE 5

YoYou dairy plan a no go for nowincluding more than 2000 signatures on a petition organised by the Friends of Bass Valley group and 430 submissions against the planning application.

Cr Brown said the council considered the advice of the planning department, but also took into account the broader concerns of the community.

Leadbeater Ward Councillor, Clare Le Serve, who moved the adopted motion, said the application was inconsistent with the Protection of Agriculture Land and Sustainable Agriculture, in particular the prox-imity of the free stall barn to the community amenity and residents.

As council, we have to weigh up all the informa-tion and consider all the objections, and we also need to take into consideration that this is a large invest-ment to the shire, Cr Le Serve said.

The dairy industry needs innovation, growth and technology that will support and see the sector into a competitive position into the future. The agriculture sector embraces national and international markets as a part of the free trade agreements and sees the importances of this to the countrys economy.

But as council we must get the planning right, understand the environmental impacts and work with the sector to better outcomes for all.

The Bass Coast Council also moved a subsequent motion to note the work being undertaken to fill the policy and strategy gaps that relate to intensive farm-ing.

Cr Brown said the Victorian Governments Food and Fibre discussion paper identifies there is work to be done in relation to sustainable intensification, such as balancing competing land uses, environmen-tal protection regulation, animal welfare and, impor-tantly, community engagement.

However, Mr Jenkins said the decision was dis-appointing. The dairy industry needs a process and framework that avoids any situation that cre-ates planning uncertainty for potential investments in our industry. I understand community sentiment can be strong and should not be ignored but rather should be part of the whole equation. Why is it that some shires welcome investments and others dont and some can halt an investment while others wel-come it?

Mr Jenkins said industry, government and milk processors should work much smarter on the intro-duction of foreign investment and guide them through the type of investment and outcome that is beneficial to all parties.

A NEW Dairy Australia study has found that feed-ing fortified milk increases the pre-weaning growth rates of calves.

Animal scientists have known for some time that dairy heifers reared on conventional restricted milk feeding programs do not achieve their full genetic potential for growth, Dairy Austra-lia program manager Dr Kathryn Davis said.

Recent studies over-seas have shown improve-ments in calf health, growth rates and feed con-version efficiency when calves are fed greater vol-umes of milk or milk replacer during the pre-

weaning period.To better understand

the benefits and risks of feeding fortified milk on health and growth of dairy heifers, Dairy Austra-lia funded a study on four farms in western Victoria where a total of 213 group housed, dairy breed calves were randomly allocated into two diets: 1. Fortified milk diet (2L of whole milk supplemented with 150gm high quality 25/20 milk replacer fed twice daily), or 2. Control milk diet (2L of whole milk fed twice daily).

Although there was significant variation between farms, calves on the fortified milk were

Fortifi ed milk linked to increased milk productionalmost 5kg heavier and 2cm taller by the end of the trial period, Dr Davis said.

Due to low incidence of calf disease observed in this trial, no significant dif-ferences in calf health were observed between the treatment groups. Another trial conducted in winter/spring calving herds may be required to show the full benefits of accelerated

calf nutrition in these con-ditions.

However, the esti-mated average total cost, excluding the cost of waste milk, to rear a calf to eight weeks of age in the forti-fied milk was significantly more at $93.27 compared to $33.97 for the control group. The dollars repre-sent the marginal cost dif-ference between the two

the whole milk cost is not included.

Dr Davis said despite the cost difference, the benefits extended well beyond calf-hood.

An increased growth rate from birth to 12 weeks has a positive impact on mammary gland develop-ment which may trans-late into increased milk production over the life

of the cow, and potential increased profit for the farmer, Dr Davis said.

Strategic use of enhanced calf feeding may also offer an opportunity to enhance the growth rates of later born calves on seasonal calving farms, she said.

Calves born in the second half of the calv-ing period may be able to

achieve increased growth rates during the pre-wean-ing period and thus mature more quickly, and reach breeding age in line with earlier born calves.

Dr Davis said more research on the impact of accelerated calf rearing on Australian systems would be needed for the full cost benefit potential to be determined.

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12 // AROUND THE REGIONS

New South Wales

South Australia

LION DAIRY and drinks producer, owner of brands Dairy Farmers, Pura, Farmers Union, King Island Dairy and Yoplait among others, held a centenary celebration to show its appreciation for 16 NSW farming families who have supplied milk to the Dairy Farmers brand for 100 years or more.

Its incredible to think that some of the farming fami-lies with us today were there at the very beginning, Lion Dairy and Drinks managing director Peter West said.

While so much has changed over the last century, suc-cess in the dairy business is still about hard work, a com-mitment to quality, building relationships and thinking long-term.

These 16 farming families have these qualities in spades, and were very proud that they have chosen to partner with Lion and supply the Dairy Farmers brand for 100 years or more.

Representatives of the families attended a special cen-tenary celebration at Mittagong on August 24 together with the NSW Minister for Agriculture, the Niall Blair, dairy industry leaders and Lion representatives.

Lion currently partners with 84 NSW dairy farmers: 53 Dairy Farmers Milk Cooperative farmers and the balance contracted directly to Lion. Together these farmers pro-duce 200 million litres of milk annually.

Dairy farmer and 100 year awardee Ben Honey said: Our business began in the 1840s, six generations back, and we have been dairying on the same farm ever since. We have been with Dairy Farmers since the cooperative was established. In that time weve grown our herd to 200 cows and we now produce around 1.8 million litres each year.

Lion salutes 100yr dairy farmers

Fellow awardee Mark Fraser said: Its incredibly important we help the next generation of young farmers inherit a bright future and I have been investing with my son Brad to grow our operation. We now operate three farms and Brad, who has only been running his own farm for 12 months, recently took out Lions milk quality award. Altogether, we manage a 1200 herd producing 8.5 million litres of milk annually.

Peter West, managing director, Lion Dairy and Drinks, with farmer Bryant McEvilly from Evilly Vale Farm in Robertson.

GippslandIts expo time again at KorumburraTHE SOUTH Gippsland Dairy Expo is on again at Korumburra Show-grounds on Wednesday, September 23 and Thursday, September 24 from 9am.

The expo showcases the latest in dairy innovation and technology. Theres also the Ladies Pavilion and dedicated activities for the kids.

Dairy Expo secretary Deanne Ken-nedy said the expo would not be the success it is today without tremen-dous support and help from its com-munity volunteers.

Once again, the Korumburra Rotary Club will be in charge of the Kids Activity Pavilion and the Poowong Kindergarten will be coor-

dinating the food for the patrons of the event. In addition to these organ-isations, the Strzelecki Lions Club has various other community volunteers who assist with the event each year, she said.

The Dairy Expo started 16 years ago with the committee having a core objective to deliver a one stop shop to local farmers, so that if farmers were busy, they could visit, do their business and leave having spent a valuable couple of hours. Today the event still has the same focus, Deanne said.

This year, Holstein Australia have organised Phil Hentschke to deliver a presentation titled The type of ani-

mals you own equals profit for your business.

The presentation will take place on Wednesday at 1pm and Thursday 11.30am.

And dont miss On Farm con-sultings Matt Harms who will host a panel discussion What does suc-cess look like in the dairy industry on Wednesday at 11am.

The Udder Truth Showbag is also back, after a successful introduc-tion to the Dairy Expo last year and is available for purchase for $2 at the gate.

It offers the chance to win $3000. Visit www.dairyexpo.org.au for

more details.

DairySA chair among nominees for DA boardDAIRY FARMER and chair of DairySA James Mann has been selected to stand for election to the Dairy Australia board as non-executive director at the AGM in November.

Mr Mann is the owner of Donovans Dairying Pty. Ltd. at Wye, South Australia. The business has pioneered innovative grazing and production systems for dairy in southern Australia and continues to explore leading edge opportunities for business sustainability.

James has been the chair of DairySA since 2002 and has also performed other

dairy industry leadership roles. There are three board vacancies this year.

Other nominees are David Mallinson, executive general manager, business operations for Murray Goulburn Cooperative, and John McKillop, who was first appointed to the Dairy Australia Board in 2012, and has been nominated for re-election as a director to fill the agribusiness and strategy vacancy.

All candidates will require more than 50% of the votes cast at the Dairy Australia 2015 AGM in November to be elected

Sub Tropical

THE DEPARTMENT of Agriculture and Fisheries is providing up to $10,000 to eligible irrigators who participate in the Improved Economic Productivity from Irrigated Agriculture in the Qld Murray Darling Basin project.

The project is focused on improving on-farm water productivity, measure-ment and management and individual system components (storages, delivery channels, in-field application and tail-water/drainage).

Funding is for the reimbursement of selected equipment and/or professional services. Expressions of Interest for Round 2, which opened on September 1, can be sent to [email protected]

Applications can be received from Thursday, October 1 at 8am and will be reviewed on a first-in first-served basis. The first 40 eligible applicants approved for funding. Phone DAF on 13 25 23 or visit www.moreprofitperdrop.com.au

More profit per drop for Queensland farmers

Western AustraliaCelebrating WAs produce and people at its heartTHE CREAM of WAs dairy and farming sector will head to the event of the year on Thursday, September 24 at HBF stadium, Mt Claremont.

Hosted by WAFarmers, the Heart of WA is the biggest event of its kind

in Western Australia, bringing together everyone with an interest in the agricultural industry.

The evening of fine dining, entertainment and networking is in recognition of WAs

hard working producers and attracts everyone from the local farmer or butcher to grain merchants, agronomists and machinery dealers.

Visit www.wafarmers.org.au/events/heart-wa/ for more information.

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AROUND THE REGIONS // 13

KEY

TasmaniaMaking quality silage sessionsEXPERT (LIVING legend) Frank Mickan will speak on making quality fodder in the form of silage and hay to sup-port stock growth and milk production.

Knowing what you can control in the silage making processes will help improve the quality. Frank will be at Ouse (September 28), Hagley (September 29) Scottsdale (September 30) Elliot (October 1) and Smithton (the night of October 1) Contact [email protected] for more details.

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THE APPLE doesnt fall far from the tree, the saying goes.

Thats certainly the case for university student Wendy Parish, who grew up on her parents dairy farm near Colac in south-west Victoria. She is now majoring in production animal health at the University of Melbourne.

On study breaks shes home on the farm helping tend to the calves and feeding the cows.

I think I prefer working with animals, Wendy said. Ive always been around animals

sometimes theyre easier to understand than humans.

Wendy recently completed a two-week industry placement at the Australian Dairy Herd Improvement Scheme, and while that was an enjoyable experience, it hasnt made her choice any clearer.

There are so many more options that I didnt even know existed before I went there. I might keep studying after my degree and go into research.

Its hard to decideeverythings so

A love of animals shapes career choice in agriculture

interesting.Wendy is one of the

many dairy farming faces to feature on Dairy Australias Legendairy campaign website.

Visit www.legendairy.com.au

INFORMATION ON financial and physical performance of dairy farms for 2014-15 in northern Victoria and across the state will be covered at two sessions this month. The Down to Business workshops will also introduce DairyBase, the newly released national dairy farm business database.

A consultant will also

discuss farm business returns and making profitable business decisions this season.

The first session is on Monday, September 14 in Wondonga and Tuesday, September 15 in Shepparton.

Contact [email protected] (Wodonga) and [email protected] (Shepparton)

Dai ry News aUsTraLia september 2015

14 // OPINION

EDITORIAL

mILkIng IT...

RumInATIng

Is almond milk nuts? WHAT PERCENTAGE of almonds should be in the ingredients of almond milk to make sure consumers are not being misled? Well, a class action filed in the US against WhiteWave Foods and Blue Diamond Growers for false advertising looks set to nut it out in the civil courts soon. Here at Dairy News of course, the concern isnt really whether there is a small (2%) amount of almonds in the product they sell as milk, but in fact whether you can really call it milk at all? Given that the term milk has its roots in an Indo-European word melg, which means to wipe or stroke, were not sure any type of liquid that doesnt involve actual milking should be called milk at all. Camels, goats, you are off the hook. But almonds, coconuts, soy beans, oats and cashews is it time for a new phrase? How about non-dairy water-based composite? Sounds delicious

Fighting global warming one belch at a time A FOOD supplement could reduce cows farting and burping by nearly one third and help save the planet. At least one third of all emissions of methane, a potent greenhouse gas, is from ruminant animals. Over 12 weeks, cattle that consumed the chemical 3NOP also gained 80% more body weight than those given ordinary feed. The 3NOP (3-nitrooxypropanol) compound was developed by DSM Nutritional Products, a Dutch supplier of feed additives. The product seems safe and effective. But note, in cows that ate the supplement there was no decrease in feed intake, fibre digestibility and milk production. If regulators approved it and farmers began using it, this methane inhibitor could cut greenhouse gas emissions from livestock. Another fine example of what good R&D can achieve.

Cows some of Russias best fed RUSSIAS BAN on the Wests dairy, meat, fruit and vegetables is heaping high the tables of that countrys nine million cows. From early August, the cows have been dining on brie, camembert and chorizo -- all foods which fall foul of the ban. Until now, food found by government inspectors to be from Europe and North America was simply returned to its country of origin. But now authorities in Russia are planning to turn the produce into high-protein flour for livestock. A spokesman for the agricultural safety regulator says meat and dairy products can be used as raw materials for high-protein flour to be added to food for livestock.

Another old girl LAST MONTH Dairy News brought you the story of two now-retired old cows from Waitako, New Zealand, which reached the ripe old age of 21. We put the call out for someone in Australia to top the record. Thankfully, Veronica Penfold, from Willow Grove in West Gippsland, got in touch and told us about her old girl named Denz-u-horse who also turned 21 on April 11. After 18 pregnancies and 18 calves, were pleased to know the old girl is now fully retired and still in good health. Lets hope she makes it to 22.

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FARMING AND industry groups are right to pull their collective resources towards ensuring the China free trade agreement is officially endorsed by Parliament and bought into effect by the end of 2015.

The stakes are so high for Australias economy, which based on the most recent data is in desperate need of a kick start follow-ing the mining downturn, that the possibility China could walk away and look elsewhere, as was suggested by our Trade Minis-ter Andrew Robb, doesnt bear thinking about.

The stakes for the dairy sector are especially high. After the disappointment of the Japan free trade agreement

(FTA), and with the Trans Pacific Partnership looking like fall-ing over, the China FTA would deliver both immediate and long-term benefits in terms of jobs and investment, especially in rural and regional areas where it is needed most.

The Australian Dairy Industry Council highlights that failure to implement the deal by December 31, 2015 will see the Austra-lian dairy industry unnecessarily incur tens of millions of dollars in tariffs that would otherwise be avoided worth about $60 mil-lion. The full benefit to the Australian economy is billions more.

Thats not to say the agreement isnt without some risk. The degree of that risk especially in the form of Australian

workers losing out to cheaper foreign labour depends on the legal interpretation of the detail in an agreement that is now freely available online but largely inaccessible to the average punter due to its sheer size and seeming need of a law and commerce degree to understand.

This leaves us all at the mercy of political, union and industry leaders to interpret according to their own prejudices and inter-ests.

The Minister for Trade and Investment has labelled any attempt by Labor to delay the agreement as economic sabotage, while Bill Shorten, himself a former union boss, says while he is supportive of the China FTA and the opportunities it presents, his party will not compromise on Australian jobs.

We can only hope Shortens stance amounts to little more than political posturing.

Because if this stance amounts to the failure to secure the China FTA, we will see the loss of far more Australian jobs than the labour movement believes it is fighting for.

No China FTA means less jobs in the long run


OPINION // 15

ITS ALL about change here on the farm.

In the last eight years, weve shifted the calving dates, sown new pasture species, planted kilometres of shelterbelts, upgraded the water system and installed sprinklers in the yard. Were embarking on a little irri-gation infrastructure, too, in a bid to counter the shorter springs and unre-liable autumns that have begun to dog the district.

Not that it makes us special. Plenty of other dairy farmers around here are doing all this and more.

Were scrambling like a mob of pinko greenies to deal with the impact of erratic seasons. Not the latte-sipping type but the sunburnt ones who actu-ally get their hands dirty planting trees.

Theyre busy at the Ellinbank research farm, too, where cows sleep over in burp mootels measur-ing the impact of different feeds on methane. In a new breakthrough, scientists have even found a way to cut dairy cow emis-sions by 30%.

None of it is cheap but all of it from the lab to the paddock is smart.

The research proves to the world that the Australian dairy commu-nity is already doing more than its fair share to address climate change. Beyond its public relations value or contribution to the planets health, such proactive work is great insur-ance against the day when political pressure mounts for increased regu-

lation or a price on pollution.And, of course, I dont need to

tell Dairy News Australia readers how extra bought-in feed can savage a farms profitability. In our case, it seems we have lost roughly a tonne of dry matter per hectare to the short s prings. Thats about $60,000 wiped off the bottom line just there; much more than the rising cost of power.

Irrespective of the cost, Australian dairy farmers can and are adapting to climate change. The question is: can, and should, we do it all by ourselves?

If we (and our children) are going to keep on adapting, we need the best possible information to make the most of our farms resources. We also need to invest in strategies that allow us to make manageable adjustments rather than being forced to make rad-ical decisions when crunch time hits.

It takes time, clever people and money to successfully adapt

with new pasture species, evolving nutrition, more accurate weather and climate forecasts, efficient water infrastructure and fresh revenue streams. It can be done, so long as we, as individuals and the wider Australian dairy industry, have the resources.

But if we dont ask for the tools, were unlikely to get them. Im

grateful that Australian Dairy Farmers has a clear climate change policy and has been such a strong advocate for Australian dairy. This is the time to throw our support behind that push for greater climate change resources.

Some say we need to be careful about choosing our bedfellows. The same latte-sipping pinko greenies who are agitating for action might turn on us and demand we drop a coin into a slot every time a cow burps. The reality is that we cannot hide, the connection between

cows and methane is already well known. Even so, many responsible environmental groups are reaching out to farmers. And, these days, we have much more in common than that which divides us.

Lets start the conversation and take the time to talk to our local MPs and the wider Australian public about the progress we have made and the support we deserve. Marian Macdonald is a Gippsland farmer. You can follow her blog at milkmaidmarian.com

Marian Macdonald pictured with her two children.

Pinko greeny: the changing colour of farming

If we (and our children) are going to keep on adapting, we need the best possible information to make the most of our farms resources. We also need to invest in strategies that allow us to make manageable adjustments rather than being forced to make radical decisions when crunch time hits.

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16 // MARKETS

THE PAST year has tested a lot of the assump-tions that had been made about the world dairy market, most importantly that there was a once-bottomless market being driven by the urbanisa-tion miracle occurring in China.

Everyone got that wrong economists, food companies, dairy export-ers and analysts but especially the Chinese government that has been caught out by the mas-sive loss of confidence in its industrial demand, cur-rency and stock market.

Even the worlds big-gest dairy exporter, with a

long association and deep investments in the market, couldnt see the building stockpiles and flattening demand.

With acute 20/20 hind-sight, the Chinese dairy boom and bust may go down as one of the big-gest bubbles in the history of dairy trade, but leaves

us with some staggering numbers. Chinese import growth exploded from 2012 to 2013 to consume an additional three billion litres in a single year with expectation growth would keep going. This surge very cutely equalled the expansion in NZ output over three years to 2014 as it geared up to supply the surging demand. Imports slid in 2014, and again over 2015, and many now think Chinas future norm will be back at 2012 import levels.

Add that to Vlad Putins hissy fit with the West, and the subsequent clo-sure of Russias cheese

market which put a further 2.3 billion litres of market demand into doubt. This came at a time when net export availability (after domestic demand) from the big three exporters grew nearly four billion litres.

Hence the demand dis-ruptions coupled with extra supply meant an extra nine billion litres Australias total annual output was without a home over the past year.

Low prices encouraged some keen buying into several markets South East Asia, Middle East and North Africa, Mexico and South America to

soak up about 40% of that volume. The world is now still left with a large prob-lem literally a powder mountain to work through before some bal-ance is restored.

But what does bal-ance actually mean? It isnt some calm derived from a neat meeting of minds of buyers and sellers for mutual ben-efit. Simply, its the aver-age prices at which trade has been done over the long term (since 2007 when the world changed) milk powders at about US$3,500/t and cheddar around US$4,000/t. In 2012/13 at these prices,

Volatility rules in search for balanced global market

when the $A traded at around parity with the $US, average southern milk prices were close to $5/kgMS. With the dollar at or around US70c, those prices will pay well above $6.50/kgMS. So, youd like to see them back, right?

The world will adjust, the market will recover but just what will the new norm look like beyond that?

Sorry, but this is another phase of extreme volatility that has plagued dairy markets since 2006. Dairy is not the only sector going through this, given close relationships between grains, meat pro-teins, and oilseeds, and the greater fragility of the worlds weather not to mention Chinas influence and geo-political upheav-als.

The history of spot prices for Cheddar and SMP shows the contrast over time.

Either side of a period of relative calm from early 2010 to mid-2013, mar-kets have experienced lengthy phases of extreme volatility. Up to 2009, a global food shortage then a GFC had large impacts on trade. Since mid-2013, a more complex suite of influences have impacted the sector.

Can we come out of this deep plunge? The adage the best cure for low prices is low prices is now at work to slow down milk supply, but it will take time.

Supply responses always work faster when the market is low as long as it takes to put cows on a truck bound for burger heaven, or to hang-up on the feed merchant. On

the way up, the response is far slower - high prod-uct prices in 2013 and 2014 induced a positive, grad-ual milk supply response which has lasted well into 2015, spurred by the removal of EU production quotas.

A slowing in milk output is underway in NZ, and will accelerate as its season unfolds. A gradual slowing has also started in a number of EU states more exposed to com-modity exports. The slow-down may take longer as new found freedom post-quota has created its own monster, and exports are a small portion of milk use.

There is much more to unravel from the cur-rent market situation, as this extremely volatile cycle quickly built large stockpiles. Chinese pro-cessors will take time to work through milk powder inventories, but buyers in other regions such as SE Asia and MENA are also well-stocked.

All up, it will be very lucky if we see the bal-ance restored to prices in the next year. Most likely they will take longer to arrive, certainly in actual prices paid to exporters, as opposed to the emotion captured in spot prices. Poor weather may change that.

Will the dairy world learn from these inevitable impacts? Possibly not a lot.

China as a single large market is a black hole because its data in most areas cant be believed.

The biggest culture challenge for China as it moves more into a con-sumer-led economy is to be transparent and simply tell the truth.

FRESH AGENDASTEVE SPENCER

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MARKETS // 17

GLOBAL DAIRY markets have only recently begun to show signs of recovery, though more positive market sen-timent risks being countered by the ongoing fundamental issue of booming supply outpacing demand growth.

While a quieter Chinese market and the absence of Russia continue to be notable demand side-influences contribut-ing to the current market situation, the prolonged period of depressed prices has encouraged buyers in a number of more price sensitive markets, such as Africa, South East Asia, and the Middle East, to stock up on dairy product. Individual countries within these regions are diverse and rarely make the headlines, but their collective price responsiveness adds a valuable degree of balance to volatile dairy commodity markets. When prices are high, they buy less; when prices fall, they stock up.

What were looking at is some basic economic princi-ples at work: in general, the quantity demanded of a good change with price, and demand for a product, is influenced by the relative price of substitutable goods. In price sensi-tive market

Documents

Dairy News Australia September 2015