Dairy deregulation:
Milking profits

by Tom Pearson

The deregulation of Australia's dairy industry will see thousands 
of dairy farms go to the wall. The upshot of the Howard 
Government's deregulation plans — to scrap all State pricing 
controls on fresh drinking milk as of July next year — will be 
growing monopoly control over dairy produce as smaller farms are 
priced out of existence.

Furthermore, while milk prices for consumers may fall slightly in 
the short term, inevitably the big dairy conglomerates and major 
retailers will force prices up while the return to smaller farms 
for their produce will continue to drop.

Current regulation of fresh drinking milk guarantees farmers 50 
cents a litre for what is termed the farm gate price.

In order to survive in a deregulated market farms will have to be 
milking 400-500 cows i.e. 750,000 to 1.5 million litres per year.

The deregulation is conditional on the agreement of all the 
States, so the Federal Government is dangling a $1.8 billion 
"adjustment package" in front of State Governments, to be paid 
for by consumers through a levy of 11 cents per litre on 
retailers.

The package is to be used as a form of subsidy to ease many 
smaller operations out, and for an up-front payment of $45,000 
for the smallest producers to leave the industry immediately.

Dairy industry groups, such as the Dairy Industry Council, reckon 
the plan will close around 3,000 dairy farms.

Recognising the dangers inherent in these free-market proposals  
the Bega Valley Water Management Committee, in the dairy town of 
Bega in southern NSW, commissioned a study to examine the effects 
on the local industry and community: Social Impacts of Dairy 
Industry Deregulation and Water Reform on Dairy Farmers and 
Communities in the Bega Valley.

The report is based on an examination of census information 
between 1981 and 1996 and a survey of 109 (73 per cent) of dairy 
farmers in the Bega Valley and Eurobodalla Shires.

Dairy farms in the area are mostly family affairs.

Across all the dairy farms there is an estimated 2.3 full-time 
equivalent farm family members employed on each farm with an 
additional 1.1 full-time equivalent non-family members.

This represents the equivalent full-time employment of 507 family 
and non-family members in all the region's dairy farms.

Each farmer was asked how a drop of five cents, 10 cents and 15 
cents per litre for their milk would effect the operation of 
their farm.

They estimated a five cent cut would make eight dairy farms 
unviable, effecting 25 family members and 10 non-family 
employees.

A 10 cent cut would make 70 farms unviable, effecting 228 farm 
family members and 81 non-family employees.

A 15 cent cut would make 121 farms unviable and hit 397 family 
farm members and 137 non-family employees.

As an example of the impact on the economies of local towns, the 
121 farms have together an annual household and farm expenditure 
of $52.9 million, most of which is spent locally.

But the loss of this input into the local economy represents only 
the direct expenditure by dairy farmers. It would clearly 
generate flow-on impacts in towns and communities throughout the 
region, says the report.

Aside from hurting the businesses that provide goods and services 
to dairy farmers, it would indirectly hit many businesses and 
community services.

"The economic and social `multiplier' effects under the three 
scenarios examined are likely to be extremely significant given 
the dependency of this region on the dairy industry", says the 
report, "and would likely effect the very viability of many rural 
communities and townships in this region."

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