Rudderless Dairy – makes my heart bleed

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Marian McDonald was a gusty woman when she took on the family farm in 2008. She bought a refreshing feistiness to dairy conversations. She is a champion of the grass roots, is not afraid to tackle the tough issues in her blog MilkMaid Marian, she asks the questions that need to be asked of people who should have the answers and she has the courage of her convictions

Today she gives her thoughts on John Mulvaney’s opinion piece in The Weekly Times in her post Disillusioned Dairy  

Mike Logan the former CEO of Dairy Connect also reflected on the state of the Australian Dairy Industry in Nov last year in his opinion piece Australian Dairy has Lost its Rudder.

Mike says

The leadership challenge of the Australian dairy industry has increased to a level that I believe is insurmountable without significant government intervention. I am not a supporter of government intervention.

Unfortunately, the time has come.

…..

The hubris of the board and senior executives of MG ( Murray Goulburn) has left the Victorian dairy industry – and by association, the Australian dairy industry – without a guiding rudder. The Victorians are at sea and going nowhere and are hoping for tides or winds to take them.

….

Put simply, the end of the era of co-operatives has allowed the processors to control the industry. Presently, there is no unity between the farmers and the processors. Many will blame the supermarkets but the numbers don’t support that view. It is not Colesworth.

The leadership challenge is within the industry itself. Specifically, the leadership challenge is with the farm sector of the dairy industry.

…….

The ship is at sea, rudderless.

It is tawdry to note that the current Chairman of the ADF is also an ex-chairman and I believe a current Director of WCB. Another Director is from Fonterra. Most of the ADF’s budget is channelled through the processors. Clearly, the processors control the farmer’s representative body.

Mike comes from an industry with a highly successful farmer leadership lobby model in Cotton Australia. As a former Chairman of the Board of the Cotton Research and Development Corporation he bought a breath of fresh air, a wealth of experience and drive and like Marian feistiness to the dairy industry.

In his opinion piece Mike proffers the following solutions

What should the ADF do?

The ADF is the focal point of the leadership challenge. The ADF needs to reform itself into a functional & efficient dairy farmer representative body.

What should the Government do?

The government is rightly reluctant to interfere in industry policy and strategy. Governments all hope to be guided by an industry with a unified approach to the challenges of the future. When governments are forced into these positions they usually deliver blunt and inelegant solutions. Often, there are deleterious impacts from the unintended consequences of government interference in industry policy.

The Government is now at a point where it has to assume that role. The government has to free up the relationship between the farmers and the processors by addressing the focal point of the relationship – the contracts.

You can read the full piece here  It makes one hell of a lot of sense

My thoughts on farmer leadership in dairy?

As some-one who did put their hand up for roles on farmer lobby groups I agree with Marian. We wear out our champions. The majority of us are under-prepared from a governance, negotiation skills and general whole of supply chain knowledge capacity to make the changes required.  I was one of those under-prepared. ADF has some fresh blood and now has funding to build leadership capacity for our farmers. I look forward to them using it wisely. I look forward to our farmers seeking out the successful models, asking the right questions, being prepared to listen and feeling confident they have the skills and the support of their fellow farmers to take the Australian Dairy Industry to the heights it deserves

Added note. Another hugely successful farmer lobby group model is Farmers for Climate Action I know why this model works so well. It would be a very exciting day if  Australian dairy farmers embraced this model. Look out world

 

 

Please take the ad down Mr Helou

Its Father’s Day again and as usual I am reflecting and beating myself up as I traditionally do on these family days. I always had great aspirations of being the best mother, wife, sister, niece and nowhere near ever met them. These days I am doing my very best to take comfort in the fact that you can’t give what you don’t have.

I am putting it down to the fact that I can’t relax and I am reflecting on this today because it was almost 12 months ago that my father expressed concern to me about my inability to relax last time I went home to visit him (and there had been far too much time between drinks as his next door neighbour kindly reminded me and rightly so). See post here

He is so right (and he is not the first person to say it nor will he be the last) I can’t relax in the day time. I can’t relax at night time. I wake up in the middle of the night with big ideas that I have to write down. I wake up in the middle of the night for too often for bizarre reasons. How much more bizarre is this? I woke up last night worried about Gary Helou and have worried about him all day.

Gary Helou The Australian

I am worried the happy face is just a front – Photo source The Australian

I am worried about how he was handling being the man of the moment that everyone ‘loves to hate’. Take this latest video for example that has been playing on my mind since I saw it a few days ago

It was the MG modus operandi and culture that instigated my father’s comment last year. My father had taken me out to dinner on Saturday night. We went early as I had (or felt I had) to be home early for a conference call at 8.30pm to rally the troops to come out thumping our chests and shaming anybody who wasn’t beating the door to Joe Hockey’s office playing the Australian cooperative is the best and only model card and imploring him to keep those ‘nasty foreigners’ from buying Warrnambool ( I just love spelling that word thank you spell checker) Cheese and Butter

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Image Source here

I remember being very excited when Mr Helou took over the reins at Murray Goulburn. I had heard great things about his time at Sunrice. I said some very positive things in my blog about the MG move into NSW. But I have been disappointed at MG’s tactics  It’s not smart to ridicule your competitors especially if you need them to fill contracts you can’t. I had some strong words (excuse the pun) to say about that very unwise add when it first came out and it has been a scaringly popular post

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It’s now getting ugly. Its time to focus on the big issues MG and not take pot shots at your competitors. I am starting to feel very uncomfortable about this whole sorry saga. It can’t be fun being the person everyone ‘loves to hate’. Please take the add down. The Australian dairy industry doesn’t need or want to be floodlit in this manner .

Lets foster a healthy culture of working together to get the best outcomes for every-one in the cow to carton process.

The world and your customers are watching Coles. Will you deliver?

I have sat in on many meetings since the Coles/ Murray Goulburn 10 year deal was announced and there are a lot of wise people in the dairy industry very concerned that Murray Goulburn has bitten of more than they chew by getting into bed with Coles. I hope they are wrong

Dairy Farmers Milk Supply Cooperative Chairman recently said in an open letter to farmer suppliers

The Coles media assault says that Coles want to look after Australian dairy farmers, that they want farmers to have security of tenure, that there will be an increase in milk prices and a premium over current regional milk pricing, and that they expect milk to be sourced locally for  MG contracts.

Macquarie Equity analysts inform that there has been a reduction in wholesale price into Coles so there are real questions as to the transparency of it all; what will be the price set and the price premium. It is a question of what is the money and where will it come from. Let us not forget that Coles also said that $1 milk would not hurt farmers. Coles has the media story, will their new partners deliver? In truth it is a test for Coles to deliver.

Many are saying that the Australian dairy industry is entering the perfect storm. Milk’s heartland Victoria is under extreme pressure from dry conditions, and no real break in the weather is predicted before mid-June and the weather is turning cold, a dire combination that means there will be a shortage of grass to feed cows. On top of this 4% of Australia’s milk supply has rumoured to have gone into receivership

Milk supply in NSW is predicted to drop below 1 billion litres for the first time ever

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Source Dairy Australia

Large processors supplying the domestic market are hurting

It is in this market that Lion has no return on capital in the milk division, low EBIT margins and has written off approximately two billion dollars.

Fonterra is realigning their Australian business, changing its consumer brands as the retail price war in milk begins to bite into its profits. EBIT from its Australian consumer brands fell 31 per cent.

Fonterra Chief Executive Theo Spierings said that “there’s a new reality in Australia,” and that Fonterra is facing “aggressive competition” in milk supply and, with a retail price war in Australia; it has to ensure its supply chain is cost-effective.

Fonterra currently has 21 brands in Australia, which has room for a maximum four or five, he said. It was too soon to say what plants or jobs losses may result, though Mr Spierings noted the company has a wide variety of yoghurt brands and also faces pressure in the milk market.

On a positive note the Global Trade Weighted Index for all dairy all around the world has gone sharply upward.

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This is likely to mean that the tanker after tanker load of milk that is currently coming up from Victoria to fill the milk shortfall in NSW and Queensland will stay in Victoria for export

Seasonal conditions have been part of the perennial challenge and there is no doubt adverse climatic conditions are harder to handle in our dairy businesses that ever before. This goes for all of agriculture, there is simply less room for failure.

The fact that dairy is tougher than ever is evidenced by the tough climatic events causing farmers to exit the industry. We are running out of reserve, both in terms of cash but also equity, and the ability (and incentive) to borrow.

The national industry is not growing; the pincer of cost and revenue is tightening. When tough times such as floods and dry spells occur, low levels of farmer confidence result in some questioning why they would battle on again for this uncertain future. For this reason among others, the assurance of better terms for longer term is an imperative for farmer confidence and viability. said the DFMC Chairman

Tomorrow I am attending yet another review with a very large regional business that relies on our region prospering. What heartens me is there are many people big and small out there who care about our farmers and they are working side by side with us on the solutions

Yes indeed Coles you do appear to have trumped Woolworths with your latest media story, but no-one is forgetting you lied when you said that $1 milk would not hurt farmers. In fact its got to the point where it is hurting consumers and the country as a whole

The world and your customers are watching Coles.  Will you deliver?

Coles and Murray Goulburn announce their engagement

I got out of bed even before the roosters started crowing this morning as I was heading off to Perth to speak at the Agconnect Conference. I checked my emails first thing (as you do) to see if anything earth shattering had happened.

Low and behold something mind-blowing had definitely been announced overnight. Dairy farmers have been predicting Australia’s largest dairy co-operative Murray Goulburn would be storming the NSW/Victorian border since well before deregulation and overnight they did just that announcing a 10 year deal to supply the Coles home brand label

Exciting times indeed. Anybody who has met or heard  MG CEO Gary Helou speak  knows that  here is a man who is force to be reckoned with and he certainly has an innovative big picture vision for Murray Goulburn on the world wide stage. So I for one will be watching  with great interest to see if MG’s move to the domestic dark side provides a bright future for NSW and Queensland dairy farmers

Achieving this will be no easy gig. Woolworths and Coles have been rapidly increasing their stranglehold over supermarket market share highlighted by this Sydney Morning Herald article “Coles and Woollies put the screws on their competitors” ever since Coles got fair dinkum in 2008.

Woolworths is not only the most profitable supermarket in Australia, it is the most profitable supermarket in the world ( Coles comes in third after Wal-Mart)

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Supermarket Retail Margins

Will the Coles and MG partnership be a marriage made in heaven?. Time will tell.  What I do feel is this move by Murray Goulburn is the change we desperately needed to happen. If his reputation is anything to go by Gary Helou is just the man we need to show the leadership and drive required to ensure dairy farmers supplying Coles get a fair deal

Just a quick reflection on this race to the bottom marketing strategy Coles and Woollies are determined to play out I am with Naked’s Adam Ferrier when he says

“Being the cheapest is a promise to nowhere. I fear the current marketing strategy is buying footfall, whilst eeking out anything aspirational the Coles brand had.

“Marketers will have a difficult time re-building the Coles brand after this current bout of Coles ‘the cheapest, daggiest, un-aspirational place to buy your groceries from’ has finished.

“You can’t just be the cheapest and sustain market share. Cheap still needs to be aspirational or fun or clever… Cheap is also increasingly starting to mean ‘we’re squeezing our suppliers’, something consumers don’t want to hear.”

So maybe this new way of doing business will be a win not only for farmers but also a big win for people power. Australian consumers have stood up and told the supermarkets enough is enough. Look after our farmers or we will vote with our very loud voices.

To see what some of the industry heavy weights have to say head on over to Milk Maid Marian’s excellent blog on this topic found here

This interesting comment from Simone Smith from the Weekly Times MG Finally Makes it Mark 

Statistics are from http://www.daff.gov.au/__data/assets/pdf_file/0007/2269762/aus-food-statistics-2011-12.pdf