'It'll be long-life or powdered for our children': dairy farmers crushed by drought and $1 milk

At Mayberry Farm about 20 minutes east of Moss Vale, the cows' feed is being extended with orange pulp, a grainy mush left over from brewing beer, old bread from McDonald's and wilting vegetables - including a pristine artichoke - that would have otherwise been thrown out by Harris Farm.

In the same way a family may stretch some rissoles by adding leftover bread, dairy farmers in the Southern Highlands are doing anything they can for their cows to survive.

Dairy farmers Craig and Tammy Whatman have been supplementing their cows' feed.

Photo: Janie Barrett

The worst rainfall on record in the region around Moss Vale comes on top of nearly eight years of punishing milk discounts (known as $1 milk) that NSW Farmers' Erika Chesworth says has robbed dairy farmers of any resilience to survive the drought.

"Discounting has been building. It has been getting worse because the drought exacerbated it in a monstrous way, and we don't have anywhere to go except go broke," says Chesworth, the chair of the NSW Farmers' dairy committee whose family owns Little Big Dairy near Dubbo.

To offset the high costs of buying feed and hay, fourth-generation dairy farmer Craig Whatman and his wife Tammy have been scrounging for scraps to supplement the hay and pellets they're feeding their hungry cows. The cows will eat the orange pulp, but spit out the skins.

The Whatmans say they'd rather pressure the supermarkets and processors to pay more for milk long-term than have a short-term solution to the drought - a 10 cent levy on supermarket sales of milk - which federal Agriculture Minister David Littleproud endorsed in principle last week. (Both would be great, they say, but a long-term solution is the priority.)

A petition asking Coles and Woolworths to apply the levy on Change.org has gathered 60,000 signatures in a week.

Littleproud said  "consumers need to understand the impact of having few Australian dairy farmers north of the Victorian border would be much greater in the long term".

“If our farmers don't make it through the tough times, they won't be there to supply Australia milk in the future. The fact is $1 milk has devalued the milk category in the eyes of consumers by making it cheaper than water,” Littleproud said this week. Prime Minister Scott Morrison didn't sound so keen, saying he was reluctant to see anything that would push up the cost of milk.

Some dairy farmers fear that if the levy is implemented, changes recommended recently by the Australian Competition and Consumer Commission to give farmers more bargaining power and force the processors to provide clearer and fairer contracts will lose their impetus.

Without long-term change to milk pricing, fresh milk could become scarce and dairy farming would die, Tammy Whatman worries. "It'll be long-life or powdered for our children," she says. "And our grandchildren will be lucky to see fresh milk the way it is going."

Without long-term change to milk pricing, fresh milk could become scarce, Tammy Whatman worries.

Photo: Janie Barrett

The NSW Farmers' dairy committee has also called for the urgent introduction of a mandatory code of conduct to address the "unacceptable power imbalance between farmers and processors" identified by the ACCC in its inquiry into dairy and discounted milk released earlier this year.

Since private-label milk - also known as $1-per-litre milk - was introduced by Coles and Woolworths, farmers like the Whatmans say they've gone backwards.

Even in the best of times since the market was deregulated and discounting began, they've barely covered costs.

Now though, it is the worst of times, says Craig Whatman.  Despite appearances, there's not enough grass in the pastures near Mayberry to feed the cows.  "It's a green drought here," says Tammy Whatman. "It's like concrete with spray paint."

Farmers like the Whatmans say they've gone backwards since private-label milk was introduced.

Photo: Janie Barrett

Dairy farms (traditionally big spenders on machinery, repairs, etc) are cutting back to survive, and that's rippling through local shops.

In Moss Vale's Shuworx, dozens of unsold gumboots perfect for dairy farming's usual boggy conditions are clogging up the shoe shop's storeroom. Owner Sandy Dekleva says sales of all work boots have been slow, and they've had the slowest two quarters since the shop opened. When there was a little rain last week, people came in wearing shoes that had holes "the size of 50 cent pieces", he says.

Mayberry Farm: there are now eight dairies left near Moss Vale, compared with nearly 270 a generation ago.

Photo: Janie Barrett

Back at Mayberry Farm at Burrawang, the cows are coming in for the afternoon milk. Everything is automated; the milking machine reads out each cow's number and records the amount of feed the cow is eating from a trough at one end, and the milk it is producing. Tammy Whatman reminds everyone to avoid "green hats", although the dairy has a poo guard placed at each cow's rear.

Craig Whatman knows every cow's name (and number), and stops for long pats - or to let hungry calves suck on his fingers.

The farm employs only two part-timers and Tammy and her daughters work off-farm to offset the farm's losses. They also run school tours.

There are now eight dairies left near Moss Vale, compared with nearly 270 a generation ago, and many dairy farmers near Mayberry are closing.

Because of farmers leaving and the drought, milk production fell 7.6 per cent in July compared with the same time last year, says Charlie McElhone, group manager for trade and industry strategy with Dairy Australia.

At the same time, hay prices rose by 59 per cent and grain, 40 per cent.

Here's how the drought and $1 milk affects a dairy the size of Mayberry.  Every day its 170 milking cows produce about 3000 litres of milk - about 1.1 million litres a year.

Mayberry sells its milk for 50 cents a litre to processor Lion Nathan, one of a handful in the region. Lion sells the milk from Mayberry and other farms to Dairy Farmers for its own brand or Coles and Woolworths for their private brands. (Even if the same Mayberry milk is sold by Lion to Dairy Farmers, which sells at Coles for $1.50 a litre, or ends up in the Coles $1-per-litre milk, the family's payment stays the same.)

Like most milk supply deals, it is exclusive. Sources say farmers who seek to diversify by selling some milk to a local cheese-maker at a higher price, for instance, can lose their entire contract.

Most processors retain the power to adjust a contract, meaning a farmer may be paid less than he or she agreed to earlier in a season. The ACCC said that should stop.

Part of the power imbalance identified in the ACCC's dairy report was that the average farm's annual milk supply usually represented less than 0.5 per cent of each processor's requirements. Unlike dairy farmers in Victoria, who have more access to export markets, there is little in NSW.

Every six days, Mayberry's cows' milk generates income of $9000.

But right now, the drought has put the cows on an unintentional diet. They've lost about 100 kilos on average. That means they're producing about seven litres less milk than the usual 25 litres. And that means the farm earns about $250,000 less a year now than in good times.

And with a lack of grass in the pastures, every six days its cows demolish a truckload of 36 bales of hay. These costs are rising steeply. In June, a truckload from near Wagga cost $5000. The same amount a month ago cost $19,129. That's a loss of $10,000 every six days - before any other cost of running the property is taken into account.

With a lack of grass in the pastures, every six days Mayberry's cows demolish 36 bales of hay.

Photo: Janie Barrett

A survey by Dairy Australia found larger dairy farms across Australia were relatively optimistic about the future - unlike about 30 per cent of small farms, with fewer than 150 cows, who said they planned to quit the market.

The Whatman family say they'll be making a decision about whether to leave by Christmas if they can't negotiate a better price.

"The cost of production has gone through the roof, and it is generally above 50 cents a litre even in good years," says Craig. To keep going, they've borrowed. "Then the drought compounded it all, and it has all brought it to a head."

Mayberry was close to running out of feed for its cows early last month when Jade Whatman, the eldest of the family's four children, launched an emotional plea on GoFundMe, raising fears that the pressure would be too much for her father's mental health.

"I’m a dairy farmer’s daughter, writing this letter at some crazy hour in the morning because I’m trying to figure out a way to help my parents before it’s too late and one of them takes their own life from not being able to feed our cattle, pay the bills or even put a meal on the table," she said.

"Every time I read it, it brings a tear to my eyes," Craig told Fairfax Media last week.

The appeal raised more than $49,000 to pay for hay. The family also raised money with an open day and lobbied for a change in the milk price on Change.org. Only last week a donated truckload of hay arrived.

Tammy Whatman has been stunned by the public's generosity. One day she went to the letterbox and found it stuffed with $1000 in cash. But she doesn't believe she should have to scrounge for scraps or ask for charity: "We shouldn't have to fundraise when we are working from 4am seven days a week."

Every farmer understands that they must save for the bad times, such as drought, says Chesworth, but the low milk price has decreased margins, weakened the sector and made farm incomes very fragile.

Like Tammy, she's also struck by the public's generosity. Yet if they really want to make a difference, Chesworth says they should buy branded milk, including that from local milk companies and Dairy Farmers. "If you have picked up home-brand milk, you have robbed the supply chain and exacerbated the pain for dairy farmers. I get quite amused by people being generous. It is great that they are supporting the drought, but you need to link that to what's in your own [shopping] basket."

To see shoppers pay so little for milk was "highly insulting", she says. "I feel undervalued."

She urged the retailers and processors to back the introduction of the ACCC's recommendations because the current arrangements were damaging the profitability of farmers.

While the milk processors held the most bargaining power, the many thousands of small dairy farms had little, the ACCC found. That lack of bargaining power meant farmers were unlikely to benefit from an increase in the retail (or wholesale) prices of private-label milk or other dairy products. Even if processors were to receive higher wholesale prices from sales to supermarkets, these profits were unlikely to flow through to farmers.

It is understood that the Department of Agriculture and Littleproud are now considering whether to implement the ACCC proposals, and could make a recommendation soon. But the process of consultations, drafting and implementing a code could take approximately 12 months, says a spokesperson for the ACCC.

The problems of the milk industry have been around more than 20 years, said Littleproud, who indicated it was time for change. He asked industry leaders to respond to the ACCC recommendations by the end of last week.

"Deregulation began in the 1990s — we've got to start somewhere and get our farmers through this tough period," he said. "I've met with the two big supermarkets and Woolworths has shown leadership on this issue. They say they're on board so long as other retailers are too. Coles is more reluctant," he said.

The Department of Agriculture is currently investigating ways a temporary levy could also be implemented.

Littleproud suggested that consumers could also influence the market: "Consumers have huge power here. All those who are outraged on social media would do more for Aussie farmers by paying a 10 cent levy than they do by sharing a video on Facebook."

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