David Gillespie (Lyne, National Party) Share this | Hansard source

I rise to talk about this motion. One of the most important things to keeping agriculture sustainable is for our farmers to receive prices for their goods that allow them to make a profit. As you will appreciate, Mr Deputy Speaker Hogan, living in an area with huge beef producers, sugar and all sorts of horticulture, the price farmers get is sometimes a result of the supply and demand curve. But in this country, paradoxically, because of the concentration of power in the hands of retailers, we often have the situation where it is not sustainable because there isn't a normal market operating. Instead of the regular supply and demand situation, retailers dictate the price and the processors or the raw producer have to fit the volumes and the price. It is unsustainable in so many areas. How ironic it is that the inaugural ACCC chairman, Allan Fels, the champion of free markets and competition policy, is now calling for a levy on fresh milk. That is very welcome, but how ironic it is. I assume that he's reached the conclusion that a lot of us on this side and some of those on the other side have reached, that the market is definitely not delivering for the dairy industry.

Dairy farmers are the canary in the coalmine for many people out in the general community, but there are many primary producers, whether in horticulture or fruit and veg and in all sorts of processed goods, who have to meet price targets. Some of them even have to pay for the retailers' advertising. They get a price but then they get told that they have to have rebates and they have to pay for advertising and they have to pay for shelf space. All this is under the radar and not seen unless you're in the industry.

Dairy farmers have a very perishable product, like sugar, and they are price-takers, not price-makers. There is a huge bargaining imbalance between dairy farmers and their most common negotiator body, the processors, but there are some that deal directly with the retailers. Dollar-a-litre milk was the epitome. It was ruinous to many processors as much as it was to dairy farmers because there was a huge knock-on effect. The value of processors' brand milks that they'd built up over generations was destroyed, was cut away with the switch in the milk volumes that they had to put into the no-brand milks. So they would get their premium brand price, but the volume switched. It was the old switcheroo, so then retailers could say, 'Okay, we're giving processor X or processor Y their premium price, but next year we're only buying 30 per cent of the volume that they sell us at that premium price and you'll pay a different price.' So, standard terms in these contracts are due to change.

The long-awaited mandatory dairy code of conduct will address a lot of these egregious imbalances, but, as I see it, the problem starts at the top end in many instances. The prices negotiated between the major retailers with the processors are then passed on with unfavourable terms to the producer of the milk, the dairy farmer. All the risk is weighted at the bottom, onto the producer; they take the risk but they don't get the reward. Contract reform measures in the mandatory dairy code of conduct need to come in as a matter of urgency. The exposure draft is coming down the barrel of the legislative process. It's only a regulation. It can't come soon enough. Paradoxically, it is also hurting retailers, because many consumers use milk as a staple, as a benchmark for what other things cost, so they think everything's cheap.

Milk is a very nutritious product. The whole processing industry relies on fresh milk, but the rate of departure from the dairy-producing workforce is scary, and it's accelerating. We will all lose if this continues: the processors won't have enough fresh milk to process, the supermarkets won't have enough fresh product, and we will be losing industry as well as farmers and relying on imports.

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