Sussan Ley (Farrer, Liberal Party, Shadow Minister for Justice and Customs) Share this | Link to this | Hansard source

I would like to report to the House today on the dire circumstances facing the dairy industry in my electorate of Farrer. Spring has, unfortunately, crashed in the New South Wales Murray region, and that is not going to help us in what is already a dire situation with low or no water allocations. What this means for dairy farmers confronting the next few months is that they will have to buy more feed rather than growing it and storing it. Water entitlements, as I said, are zero or very small indeed, and the New South Wales government has implemented an embargo on sales. So farmers who had a small amount of carryover water which they could have chosen to cash in to keep the bank manager happy are actually prevented from doing that. Their options are narrowing every day.

The two dairy companies that we supply, Murray Goulburn and Fonterra, are working well with producers, and I commend them for that. It is incumbent on Murray Goulburn and Fonterra to offer finance on reasonable terms to support their suppliers and to help them through this. It is in the interests of the industry and, obviously, the region and the farmers themselves. And I know, as I said, that that is happening.

Milk prices, of course, vary, and milk is a product like any other that operates in an increasingly globalised market. I just want to draw the House’s attention to the numbers that we are facing right here and now. The average price per litre of milk in the area that I am talking about—the Murray Irrigation Limited area of New South Wales and some regions close to that—is about 20c. It depends on the proportion of fat and protein in the milk that is being produced. So it could be as low as 18c and, I think, as high as 28c, but the average is about 20c a litre. That is well below the cost of production.

It is not only below the cost of production—it is below the cost of feed. It takes about a kilo of feed to produce a litre of milk. The cost of feed at the moment is about $280 a tonne for grain and $250 a tonne for hay, and we are, of course, using last year’s prices, so that is high and it is going to remain high. If we do the sums, that works out at 27c per litre of milk. So it costs 27c to buy the feed to produce a litre of milk that is then sold for 20c. Clearly, dairy farmers cannot continue to do this. Additional help and support is needed.

In a normal year, of course, you can produce your own feed; that makes a huge difference. Our dairy farmers are highly sophisticated. They use the latest technology. They grow cereals and have, as I would call them, new-age seed mixes that we never would have dreamt of 15 years ago when I was a dairy farmer. Less water is used than ever before. They have the latest infrastructure. And they cannot switch their farming operations from dairy to something else—it is just not possible, because of the highly capital-intensive nature of what they are doing.

So far, since the price crashed, five of these farmers have gone out of dairying, so we are now down to 79. There were 106 in 1996. I do not have to explain what will happen if that trend continues, and I know that across Australia the figures are not much better. If you choose to go out of dairying, you have to sell your herd. Nothing could be more heartbreaking than selling a herd of artificially inseminated, AI-bred cows in milk to the nearest abattoir. Because so many people have got their cows on the market, the opportunity for them to be sold to other producers is not there, so many of those cows are simply going to the abattoir. I can only feel for those who have to load their cows onto a truck, see them go down the track and know what that means: years of genetics and care and consideration being completely wasted. And once you sell the cows you are not going to get them back. If you want to go back into the industry, it is going to be impossible because by the time you do the price will probably have gone from what it is at the moment—maybe $1,000 a cow, if you are lucky—to two or 2½ times that amount.

One bright spot is that heifers are selling well to the export market, to China, Mexico and Russia. In learning how we can get through this slump, dairy farmers are taking those options. The Australian dollar, of course, has gone up from about 80c to 86c, and that is not helping matters. I welcome the Australian Senate establishing an inquiry to look into the critical issue of milk prices. And I will ask the Senate reference committee to visit my electorate.