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Performance of Australia's Dairy Industry and the Profitability of Australian Dairy Farmers Since Deregulation in 2000

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Performance of Australia's Dairy Industry and the Profitability of Australian Dairy Farmers Since Deregulation in 2000 The Senate Rural and Regional Affairs and Transport References Committee Performance of Australia's dairy industry and the profitability of Australian dairy farmers since deregulation in 2000 March 2021 © Commonwealth of Australia ISBN 978-1-76093-208-4 This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License. The details of this licence are available on the Creative Commons website: https://creativecommons.org/licenses/by-nc-nd/4.0/. Printed by the Senate Printing Unit, Department of the Senate, parliament House, Canberra Members Chair Senator Glenn Sterle ALP, WA Deputy Chair Senator Susan McDonald NATS, QLD Members Senator Gerard Rennick LP, QLD Senator Alex Gallacher ALP, SA Senator Nita Green (from 12.6.20) ALP, QLD Senator Janet Rice (to 6.10.20) AG, VIC Senator Peter Whish-Wilson (from 6.10.20) AG, TAS Participating Members Senator Pauline Hanson PHON, QLD Secretariat Gerry McInally, Committee Secretary Paula Waring, Principal Research Officer Ms Sarah Redden, Principal Research Officer Mr James Strickland, Principal Research Officer Joshua Wrest, Senior Research Officer Kaitlin Murphy, Senior Research Officer Michael Fisher, Research Officer Jason See, Administrative Officer PO Box 6100 Telephone: (02) 6277 3511 Parliament House Fax: (02) 6277 5811 CANBERRA ACT 2600 Email: [email protected] iii Contents Members ............................................................................................................................................. iii List of Recommendations ............................................................................................................... vii Chapter 1—Background ..................................................................................................................... 1 Referral ................................................................................................................................................. 1 Conduct of the inquiry ....................................................................................................................... 2 Acknowledgements ............................................................................................................................ 2 Structure of the report ......................................................................................................................... 2 Context of the inquiry ......................................................................................................................... 3 Current inquiry ......................................................................................................................... 3 Prior inquiries ............................................................................................................................ 4 Chapter 2—Industry overview ......................................................................................................... 5 Background ........................................................................................................................................... 5 The dairy industry prior to deregulation in 2000 ............................................................................ 7 The dairy industry since deregulation in 2000 ................................................................................ 8 The evolution of milk pricing and farm profitability since deregulation ....................... 11 Views on the current state of the dairy industry ........................................................................... 15 Chapter 3—Dairy Australia ............................................................................................................. 23 Background ......................................................................................................................................... 23 The government's review of rural research and development corporations ............................ 26 Independence and the ability to support the interests of both farmers and processors .......... 29 Corporate structure of Dairy Australia ............................................................................... 29 Dairy Australia Independent Performance Review 2020/21 ............................................ 31 Views on independence and the ability to support the interests of farmers and processors ..................................................................................................................... 32 Funding and consultation on research, development, and extension activities ....................... 35 Background .............................................................................................................................. 35 Views on funding and consultation on research, development, and extension activities37 Independence and the ability to support the interests of farmers and processors ........ 44 Effectiveness of research, development and extension activities .................................... 44 Consultation with farmers ..................................................................................................... 45 v Funding .................................................................................................................................... 45 Chapter 4—Mandatory code of conduct ....................................................................................... 47 Background ......................................................................................................................................... 47 The development of the mandatory code ........................................................................... 47 Main provisions of the code .................................................................................................. 48 ACCC inquiry into bargaining power in supply chains for perishable agricultural goods .... 52 Issues raised by the Committee for the Scrutiny of Delegated Legislation ............................... 53 Stakeholder views on the code ......................................................................................................... 54 Competition in the dairy supply chain ........................................................................................... 60 Chapter 5—Industry statistics ........................................................................................................ 67 Dairy Australia ................................................................................................................................... 67 Production statistics ............................................................................................................... 67 Dairy Farm Monitor Project .................................................................................................. 68 Australian Bureau of Statistics ......................................................................................................... 68 Queensland Dairy Accounting Scheme .......................................................................................... 69 Views on statistical data collected ................................................................................................... 70 Chapter 6—The future of the industry ......................................................................................... 77 Australian Dairy Plan 2020–2025 ..................................................................................................... 77 Views on the Australian Dairy Plan ..................................................................................... 83 Alternative approaches to support a viable dairy sector ............................................................. 85 Government intervention and price regulation ................................................................. 85 Other approaches raised by inquiry participants .............................................................. 90 Government members additional comments ............................................................................ 103 Appendix 1— Submissions and additional information ........................................................ 107 Appendix 2—Public hearings and witnesses ............................................................................ 111 vi List of Recommendations Recommendation 1 3.94 The committee recommends that the Department requires that Dairy Australia increase its research, development and extension activities into tropical and subtropical dairy regions. Recommendation 2 3.100 The committee recommends that the government amend the Primary Industries (Excise) Levies Act 1999 to require processors to pay a levy to fund Dairy Australia. Recommendation 3 4.54 The committee recommends that the government make the Food and Grocery Code of Conduct a mandatory code under the Competition and Consumer Act. Recommendation 4 4.55 The committee recommends that the government investigate price discrepancies between exclusive and non-exclusive milk supply contracts, processors circumventing collective bargaining groups, and the fairness of pricing for multi-year contracts. Recommendation 5 4.56 The committee recommends that the government in its 12-month review of the dairy code of conduct give consideration to amending the code of conduct to require that: non-exclusive supply contracts be on a volume not percentage basis; and arbitration be made mandatory. Recommendation 6 4.57 The committee recommends that the
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