While dairy farmers in the Kiama region are somewhat insulated from the current turmoil in the industry, concerns about the future remain.
“It is really a perfect storm for our industry,” says Mark Honey, a fifth generation dairy farmer and Kiama Councillor. “The lifting of production quotas for European Union dairy farms has caused a glut there and that, combined with our boycott on supplying Russia following its invasion of the Ukraine, has led to dumping in China and Japan, with the price of powdered milk, cheese and butter being slashed.”
In turn, this has led to Murray Goulburn and Fontera, which rely on the export market, using a clause in their contracts to retrospectively reduce the price of milk, including for that already supplied.
“If you were supplying Murray Goulburn or Fontera you’d really be wondering why you are continuing to milk as they are offering less than the cost of production,” he says.
Our local farmers have not had their prices slashed because the milk they produce is used for domestic high value added products, like cheese, flavoured milk and branded milk.
Most of the Jamberoo Valley farmers supply Dairy Farmers Co-op, which sells it to Lion Nathan, with others selling to Parmalat (owners of the Pauls brand). Most Berry farmers supply South Coast Dairy, a local co-op, which has recently geared up its operations and positioning as a premium brand.
A couple of years ago, Kel Grey took the initiative to position The Pines as a micro-dairy, moving it from being a price taker to a price setter
by selling its milk and gelato largely direct to the public.
“It is the ones whose milk is being exported that are having the problems,” explains Mark Honey. “Some Gerringong farmers supply Murray
Goulburn, and I expect they will be under price pressures when their contracts come up for renegotiation this year.”
He sells all his milk to Lion Nathan, rather than through the Dairy Farmers Coop, at a negotiated fixed price for all he can supply until 2018. “I wouldn’t sign a contract that gave anyone the right to reduce the price,” he says. “How can you budget with that uncertainty?”
As he sees it, the only way out is if the milk price gets over the price of production. Just how that can be achieved is the big question.
“Supermarkets need to lift their prices, but even if they did you couldn’t guarantee it would flow down the supply chain to the farmer,” he says.
Mark believes the way the public has stopped buying cheap home brand milk is showing farmers people are aware and concerned about what the supermarkets are doing. “Not just with milk but with fruit and vegetables,” he says.
As for the future, Mark sees the current situation as “just another pressure on farmers” who are already contending with less milk production in the unusually dry season.
“While you have families farming they are always going to fight to preserve the farm and the industry in the Valley,” he says.
“People do it for the love of their animals and their farm. There is more to it for all of us than just financial rewards – either that or we are bloody mad.
“Some observers tend to focus on the value of our land, but it would be worth a hell of a lot more if we could subdivide it up.
“Ironically, that was one of my major concerns with the Shoalhaven merger – I have no doubt they would have approved subdivisions and
we would have lost farming in the Valley forever. Nobody wants that.”