The Federal Government has announced a half-billion-dollar assistance package including concessional loans to dairy farmers dealing with the collapse of farmgate milk prices.
Murray Goulburn recently cut its price from $5.65 to between $4.75-$5.00 kgMS, while the other major dairy processor Fonterra cut its price from $5.60 per kgMS to $5.00 per kgMS. As a result, many dairy farmers are expected to leave the industry.
As the ABC reports, the assistance package announced yesterday by Agriculture Minister Barnaby Joyce (pictured) includes $55 million worth of concessional loans this year and $500 million in concessional loans over 2016-17 and 2017-18.
“The concessional loans will go as low as 2.66 per cent. They’re currently at 2.71 per cent.” Joyce said.
“Farmers will be able to borrow $1 million or half of what they owe, whichever is the lesser, so that they can assist themselves to get through this crisis.”
The package, which received bi-partisan support from shadow agriculture minister Joel Fitzgibbon, also included increased access to financial counselling services.
As News.com.au reports Joyce also announced that, if re-elected, the government would establish a commodity milk price index to provide the industry and producers with a better idea of expected global and local milk price fluctuations.
“The Coalition will consult with the industry on the design of the index that would provide dairy farmers with valuable information for use in supply negotiations with processors and to assist in following international price trends,” Joyce said.
Meanwhile, as AAP reports, dairy farmers are rallying in Melbourne this morning to highlight their plight. They plan to gather in Federation Square and march to Parliament House.
The Australian dairy farming industry is in a state of crisis. Cheap dairy products and fluctuations in both the domestic and global markets have taken a financial toll on farmers. Consumers have rallied to help struggling dairy producers.
But this is only half the problem. The true cost of dairy is also paid by dairy cows and the environment.
Tail-docking and horn removal are routinely performed without pain relief. Lameness is another major animal welfare problem, often the result of environmental pressures, such as tracks, herd size and handling. The average lifespan of a dairy cow is six to seven years, whereas generally cows can live for 20 to 25 years.
One of the most controversial issues is young “bobby” calves. A bobby calf is a newborn calf, less than 30 days old, who has been purposely separated from their mother. Immediately after separation, cow and calf call out and search for each other.
Most bobby calves are slaughtered within the first week of their life. Handling and transport pose added problems for young calves who have not developed herding behaviours, are vulnerable to stress, and are forced to go without their mother’s milk. Each year, 450,000 bobby calves are slaughtered.
Advocacy groups frequently uncover the routine abuse of bobby calves in Australian abattoirs and challenge the dairy industry to do something about it.
Yet aside from the wider ethical questions over the use and exploitation of animals, farmers are not legally doing anything wrong. This is because the treatment of animals operates in a legal context where animals are considered absolute property.
As well as systematic welfare problems, livestock farming is, both directly and indirectly, one of the most ecologically harmful human activities. The Australian livestock sector is worth A$17 billion and dairy cattle farming is a A$4.2 billion industry.
Livestock production accounts for 70% of all agricultural land, including the land used to grow crops to feed these animals. Animal agriculture is a key factor in land degradation, deforestation, water stress, pollution, and loss of biodiversity.
Livestock farming will also be affected by climate change, particularly changes in temperature and water. The quantity and quality of pasture and forage crops will also be affected. Diseases may increase due to fluctuating weather and climate.
Emissions can be reduced
Just as the energy sector is attempting to transition to low-carbon energy sources to tackle climate change, the agricultural sector needs to transition to an ethical and sustainable alternative.
From the current crisis, there are several opportunities for farmers to seize. Large transitions are possible in land use, production, output and profitability.
Places such as Gippsland in Victoria, which currently produces 19% of Australia’s dairy, have the opportunity for agricultural development based on apples and brassicas, such as broccoli, kale, cauliflower, cabbage, turnip and mustard. Some of these crops are already popular in the region. As a result of climate change and increasing temperatures, some areas will be more suitable than others.
While still in the stages of research, perennial grain crops – which store more carbon, maintain better soil and water quality, and manage nutrients better than annuals – have the potential to contribute to sustainable agriculture. New land uses could also include carbon plantings, biofuels and bioenergy crops. Investing into further research for alternatives to livestock farming is needed.
But technical mitigation does not address the endemic animal welfare problems in the livestock industry.
Consumer demand is one of the most powerful strategies to combat animal welfare and environmental problems. Research shows that we must reduce food waste and losses in the supply chain and change our diets toward less resource-intensive diets, such as a plant-based diets. Doing so would cut emissions by two-thirds and save lives. It’s possible to eliminate animal suffering and reduce carbon emissions by reducing and replacing livestock production and consumption.
Policy initiatives also need to address these issues. The Food and Agriculture Organization’s Livestock’s Long Shadow report recommends a policy approach that correctly prices natural resources to reflect the full environmental costs and to end damaging subsidies. In the interim, higher taxes on meat and other livestock products will be necessary to improve public health and combat climate change.
China’s demand for Australian milk and other products like bottled milk will continue to grow as its middle class grows, according to a high ranking Chinese banker.
Bank of China executive vice-president Gao Yingxin told a trade conference in Sydney yesterday that Australia has huge potential to further develop its agricultural sector and increase exports to China.
“With more and more emphasis put on food safety, nutrition and health, China boasts one of the world’s largest and fastest growing milk market,” Yingxin said.
“Between 2005 and 2013, the children’s milk market in China grew at an average of 28 per cent and the recently adopted two-child policy will create even more business opportunities.”
Australian dairy farmers are currently dealing with the stress of decreased farmgate milk prices and for many of them survival is far from assured.
“For those that are able to do it and have the confidence and capacity to do so, export does represent another opportunity, particularly for firms who are struggling at the moment,” he said.
Federal Trade and Investment Minister Steve Ciobo told the conference that Asia’s middle class will increase sixfold, to over 3 billion by 2030.
“And with that larger consumer base, with the more refined tastes that grow from that consumer base, including of course a strong emphasis that there is out of the Chinese market on clean and green agricultural produce, we know that Australia can meet that demand,” he said.
That demand is likely to extend beyond dairy products to other food products.
Retailer Gerry Harvey has dismissed proposals to impose a consumer levy on milk as a way to help struggling dairy farmers and said the price should be left up to market forces.
As the Australian reports, Harvey’s interest in the recent decisions of Fonterra and Murray Goulburn to slash farmgate milk prices stems from the fact that he himself owns a dairy farm and that his retail company Harvey Norman last year purchased a 49.9 per cent stake in Goulburn Valley dairy farm.
Referring to the levy proposal which has been suggested by advocacy group Farmer Power and others, Harvey told the Australian, “In theory it might sound nice but in practice it generally either ends up in tears, or you wish you hadn’t done, there are not many instances in the last 100 years where that sort of activity took place that has longevity or success.’’
The plan includes offering concessional loans, based largely on the existing drought assistance scheme; prioritising their access to welfare support, and increasing rural financial counselling services.
While, the Labor Party supported the assistance measures, Opposition agriculture spokesman Joel Fitzgibbon described them as “vague” and said the Government had been slow to act on the crisis.
Dairy giants Murray Goulburn and Fonterra played a dangerous game of chicken by hanging onto high milk prices despite the global dairy market volatility. Even though both cooperatives are shifting responsibility to each other for the fall in milk prices, which is pushing dairy farmers to the brink, they are both at fault for their race to the bottom. Now both will have to work hard to win back the trust of farmers.
The two companies, both cooperatives (although Fonterra has most of its members in New Zealand) compete head-to-head for farmer suppliers in Australia. Fonterra is the world’s largest dairy exporter accounting for about 40% of global dairy trade and is the fourth largest dairy company behind Nestle, Danone and Lactalis with an annual gross revenue of A$9 billion, and 1200 suppliers in Victoria, Tasmania and South Australia. By contrast Murray Goulburn has annual revenues of A$2.4 billion, 9% of the global trade market and has 2500 suppliers in Victoria and Tasmania.
Since 2005, when Fonterra purchased Bonlac the two companies have fought for suppliers in Australia and grown their respective businesses to meet increasing global demand for dairy product. Their resulting pricing models to farmers were assured while dairy prices continued to rise. Farmers accepted claw back provisions – it was never thought that they would be invoked – and the companies accepted loose contractual obligations to supply. The competitive environment that ensued, from which dairy farmers benefited meant that neither company was able to hold the mantle of market leader for long.
The game of chicken was on as early as August, 2015 when Fonterra began reducing its advance payments to New Zealand dairy farmers). Throughout the following eight months Murray Goulburn and Fonterra steadfastly sat behind their respective wheels committed to hanging tough. Much was at stake.
For both cooperatives a reduction in advance payments to their suppliers in March, or earlier would have saved them considerable reputational risk, and in many cases reduced the exposure of dairy farmers to financial failure. Instead they chose not to swerve, but to hang tough, failing to ignore the significant decline in global prices, for which they both appeared oblivious.
While Murray Goulburn swerved first by lowering the milk solid price, they did so far too late. Fonterra swerved last, but by then the events in the international market had raced past the game – leaving both companies’ suppliers stranded with the over-payment problem from which they now suffer. Recklessly both cooperatives thought they could run the gauntlet with global dairy. That they actually did so for eight months is testimony to the merits of market competition.
Where to now for the two beleaguered companies and suffering dairy farmers? The benchmark for corporate behaviour and accepting responsibility for ‘bad’ outcomes was set by Johnson & Johnson in 1982.
The handling of the Tylenol crisis, where a series of poisoning deaths resulted from drug tampering, set the standard for corporate ethics against which all other subsequent behaviours can be compared. Johnson & Johnson took responsibility, took action and set about the recovery – despite not being responsible for the tampering of their product on shop shelves in Chicago.
It will be through remedial behaviour by each of the dairy giants over the next months that these cooperatives will re-cement their relationships with suppliers, as they both try to win over farmers and gain disproportionate market share at the others’ expense. The outcome both cooperatives have been seeking since Fonterra’s market entry in 2005.
Worse, Fonterra’s CEO, Theo Speirings, has now defended the price cut on the grounds that their strategy is to repatriate profit for the benefit of their New Zealand shareholders. This overlooks that the majority that of tradeable shares are held by Australian superannuation funds and that Fonterra’s Australian suppliers had to be being subsidised by their New Zealand counterparts. How else do you explain the 30% increase in farm gate price on this side of the Tasman?
By contrast Murray Goulburn’s behaviour, especially that towards their suppliers, appears far more conciliatory. Murray Goulburn has been transparent about resignations from the board and management; open about reorganisation and appointment of their interim CEO, David Mallinson; and, shared with suppliers the prioritisation of effort.
They have now offered suppliers a Milk Supply Support Package designed to spread the impact of lower milk payments across the next three years. This package sits on the cooperative’s balance sheet – where it should – with no need to take on individual loans at supplier level.
Whether or not either company can emulate the recovery of Johnson & Johnson remains to be seen, but it is reasonable to expect considerable energy, effort and enterprise being expended by them in the months that follow.
Telling evidence will be reflected in market share in 12 months.
The Coles supermarket chain is launching a consumer-driven milk fund to help Victorian and NSW dairy farmers affected by a sudden drop in milk payments.
The fund is similar to an initiative Coles launched with South Australian farmers in 2012.
The supermarket will establish a new milk brand that will pay 20 cents a litre to an independent fund, aimed at supporting the 2,600 Murray Goulburn dairy farmers affected by last month’s price cut.
But it will take two to three months to get the new brand on sale, and the money raised will be targeted to the long-term future of the sector.
Dairy farmers in Victoria meanwhile face an immediate crisis, after Australia’s largest dairy processor Murray Goulburn announced it would retrospectively cut the price it was paying farmers this season, wiping out two years’ profits for some suppliers.
Fund outcomes for South Australian farmers
Since Coles launched their consumer-driven milk brand with South Australian farmers four years ago — SADA Fresh milks — the retailer has raised about $200,000 a year for farmers.
SA Dairy Industry Fund’s executive officer Ken Lyons said the money was used for on-farm work such as pasture research, and to develop new markets, such as fresh milk sales into China.
“The fund will be investing in projects that will help all dairy farmers,” Mr Lyons said.
“As examples the three new processors that are coming into South Australia are the Beston Group in Murray Bridge, the Midfield group at Penola and the Chinese investment down at Tantanoola — they’re all seeking milk supply.
“That is going to benefit all dairy farmers, by improving the farm gate milk price.
“I think if this takes off in Victoria, it will be a win-win for the industry.”
Council of Small Business sceptical
Peter Strong from the Council of Small Business said the new Victorian consumer-driven fund was only needed because of what the large retailers had done to the industry in the first place.
“This is such hypocrisy and it’s not costing them any money at all,” he said.
“It’s going to cost their customers money, and to pretend to be doing something good, when it’s not costing them any money at all.
“The fact they’re not making any money out of it, is neither here nor there because they didn’t anyway.”
He acknowledged this situation was created by Murray Goulburn not dropping its price early enough, and the global price has collapsed.
“In Australia the fragility of the sector has come from Coles and Woolworths and what they’ve done to the sector,” Mr Strong said.
Meanwhile, Murray Goulburn is facing a class action in the Supreme Court of Victoria, from shareholders who argue the company engaged in misleading and deceptive conduct in statements when it listed on the stock exchange last year.
The company strongly denies any wrongdoing and will be vigorously defending the claim.
Freedom Foods and partner International Dairy Products (IDP) have launched the Love’in Farm UHT milk range in Vietnam.
The partnership, through Freedom’s Pactum Dairy Group (PDG) business, is the Australian company’s first partnership in Vietnam. Freedom said in a statement that the commencing volume of the high end product is expected to reach 4 million litres in the first year of release.
“The product range will retail at a small premium to domestic UHT fresh products, with IDP aiming to make their high quality Australian dairy milk more accessible to a wider Vietnamese audience,” the statement said.
“IDP expects to expand the range with other high quality value added products to build a strong portfolio of Australian dairy products for Vietnam and other export markets.”
Meanwhile, as the Business Insider reports, Freedom and distributor Pinlive have revealed plans to sell locally-branded long life UHT milk and cereal in China.
Freedom pointed out that UHT milk remains on Beijing’s list of products allowed for import through free trade zones and added that the China Australia Free Trade Agreement is set to improve the competitiveness of Australian companies in China.
Agriculture Minister Barnaby Joyce has said he will urge retailers and dairy processors to increase what they pay dairy farmers for milk.
Joyce told Channel Nine yesterday he would phone the relevant parties in an effort to resolve the problem.
“[It’s] an anathema, I think it’s incredibly wrong that water in a bottle is priced more than milk and I think we need to have a strong yarn to the retailers about that,” he said.
“[I will] basically ask them if they want to fix it, that would be great if they don’t ask the government to fix it which they always complain about but that’s an option that we can always keep up our sleeve.”
The statement follows the recent decisions by Murray Goulburn and Fonterra to cut their farmgate milk prices. Murray Goulburn cut its price from $5.65 to a low of $4.75 kgMS, while Fonterra cut its price from $5.60 per kgMS to $5.00 per kgMS.
A structural change is underway in global dairy markets. A perfect storm has emerged through a coincidence of events, technology, and policy changes across the major dairy producing nations, including Australia, which will result in a long term significant reset of dairy economics across the globe.
Cooperatives Murray Goulburn and Fonterra have both dramatically reduced the prices they offer dairy farmers for milk, sparking a backlash from farmers, who say they will be pushed into the red and out of dairy.
It is only due to the strength of the two cooperatives in absorbing the costs of high milk prices in a changing market that these reductions did not occur earlier. The cooperatives have shown an inadequate understanding of global dairy economics by over-paying farmers and by seeking to claw back over-paid advances.
The low prices have been blamed on a short-term oversupply coinciding with a reduction in demand from China and Russia. Some of this demand is now being met by Chinese investment in both Australia and New Zealand which also contributes to the changes underway. But the debate thus far has focused on problems with demand while ignoring the bigger issue of increasing global over-supply.
Since the mid-2000s a strong increase in demand for milk products across Asia, largely on the back of rising middle-income wealth led to the complete depletion of surplus dairy stocks in the European Union and the US. This change to the supply-demand equilibrium resulted in a temporary sea-change in dairy markets because growth in demand simply outpaced growth in supply by between 50% and 100% in some markets on an annual basis.
To a large extent this imbalance had been driven by regulation of the global supply market in which only a few export nations competed – Australia and New Zealand included. It resulted in higher than historical average dairy prices in global markets, but considerably more short-term volatility due to global GDP shocks and short-term supply-demand imbalances.
Regrettably a critical assumption that appears to have emerged among producers during this period, as evidenced by continued investment and expansion, was that the real price for global dairy commodities was increasing, a trend they expected to continue in the long term.
The current dairy price scenario, which would historically have been short-lived, is in fact masking underlying structural changes to supply-side dynamics that are now underway. Only approximately 7% of globally produced milk is traded (65 billion milk-equivalent litres). Therefore, a small change in supply globally has a profound effect on the global dairy market equilibrium.
Under quota, EU exports doubled between 2000 and 2013 to 9.5 billion litres and are anticipated to increase again this coming season. Quota removal has freed dairy farmers in central and Eastern Europe to increase in scale considerably, availing themselves of technologies denied during the Cold War years. Coupled with the removal of regulations concerning the transportation of liquid milk across borders, producers and processors now find themselves with opportunities for growth not experienced since the second world war.
Political policies in the world’s third largest dairy producer, the USA, are also likely to influence global dairy supply in the future. Current dairy production is being stimulated by low feed prices, which were driven by record yield seasons in 2013 and 2014, similar levels in 2015 and new projected highs this year.
Eighty percent of US dairy farm costs are feed. The reduction in feed costs from US$29.26 per 100kg milk in August 2012 to US$18.04 per 100 kg milk in June 2015 has greatly increased the value of marginal production.
The advent of large-scale fracking, which has resulted in a significant reduction in the price of oil, will likely maintain lower corn prices, at least in the short-term. This comes as the reduced value of biofuels re-focus the use of corn back to a feedstuffs for farmed livestock. The net result is that 75% of every new tonne of production across the USA is expected to be sold on the global surplus market.
Farmers have fought for free trade and open access for decades on both sides of the Tasman. Now that it is emerging, profitable returns will be caught first by the lowest cost global producer.
We are fools to think that that will be either Australia or New Zealand. Therefore, possibly with the exception of the US market, a downward reset is in store for global dairy prices.
James Lockhart is Senior Lecturer, School of Management, Massey University.
Danny Donaghy is Professor of Dairy Production Systems, Massey University
Hamish Gow is Professor of Agribusiness, Massey University
Dairy farmers have recently been left in the dark as large companies continue to slash milk prices. The farmers are now suggesting a price increase of 50 cents/litre to save the dairy industry.
In a crisis meeting in Victoria last night, dairy farmers and councillors met to discuss the idea of an emergency “milk levy”.
According to Chris Gleeson, president of Farmer Power, the proposed levy would mean the typical consumer would spend an extra $50 on milk per year, “which would solve the crisis of the dairy industry and have food security for our nation”.
Gleeson said the only alternative would be to standardise raw milk pricing for producers.
“The price change better reflects the reality of the supply and demand imbalance that is affecting global dairy commodity prices, compounded by the recent strength of the Australian dollar,” the statement said.
“We’ve been trying to send a signal since August to our farmers — and since then global commodity prices have dropped further — so hopefully this is not too much of a surprise,” Swales said.
“We have always advised caution to our farmers; we absolutely flagged a (price rise) wouldn’t happen at the end of this year, but to expect a step down.”
Fonterra Australia is also offering its suppliers an interest-bearing support loan of up to 60c per kgMS that is linked to a supply commitment and is repayable from FY18.
United Dairy Farmers of Victoria president Adam Jenkins was not happy with the price cut.
“We understand Fonterra was trying to be transparent … but to then slash the price as far down as Murray Goulburn went and in the same week is unacceptable; it smells of opportunism,” he told the Australian.
Dairy processor Murray Goulburn management yesterday met with dairy farmers for the first time since its decision to cut the price it pays suppliers.
The Weekly Times reports that 400 people attended the Camperdown Football club in Victoria’s south-west, for the first of several meetings between the dairy co-operative and its suppliers.
As the ABC reports, about 2,500 dairy farmers in total will be affected by Murray Goulburn’s to cut prices by between 10 and 15 per cent.
Murray Goulburn chairman Philip Tracy said he apologised for the unexpected move and noted that it was an emotional meeting.
“Obviously the suppliers are very disappointed with our announcement but lots of constructive comments were made for the board to take away,” Tracy told the ABC.
“Effectively we have just apologised to the suppliers for the absolute disappointment we’ve created.
“To put them in a position where they’ve had expectation taken away from them.”
Last week’s decision was accompanied by the resignation of managing director Gary Helou as well as a large cut to the co-operative’s profit forecast.
Murray Goulburn now estimates a net profit after tax of between $39 million and $42 million. Originally, in its prospectus, Murray Goulburn had forecast a profit of $89 million. Then in February it lowered that figure to $63 million.
The ABC reports that dairy farmers have started a campaign calling on the public to support them through this hard time. Called “Show Some Dairy Love”, the campaign is taking place on social media.
Dairy farmers say they may have no choice but to leave the industry following Murray Goulburn’s decision to cut the price it pays them for milk.
Murray Goulburn’s decision came on Wednesday as the dairy co-operative cut its estimate of net profit after tax to between $39 million and $42 million and its chief executive Gary Helou resigned.
As the ABC reports, Victorian framer Andrew Leahy was not expecting the price cut and does not believe all in the industry will be able to handle it.
“It’s just unprecedented. The main impact will be people just won’t be able to afford to do it and probably start selling cows, and there will be some more dairy farm businesses shaken out of the system,” Leahy told the ABC.
“I think we’ll lose a lot of the northern Victorian dairy farmers.
“We’ll have to really really tighten our belts and we’ll have to do it even again. I don’t know how tight you can go. The future of our family farm is in jeopardy.”
According to the SMH, Units in Murray Goulburn’s ASX-listed trust dropped 42 per cent to $1.24 following Wednesday’s news.
There could be more bad news ahead for the co-operative. As the Australian reports, the dramatic drop in profit estimate may be looked at by the corporate regulator.
Originally, in its prospectus, Murray Goulburn had forecast a profit of $89 million. Then in February it lowered that figure to $63 million. And now the figure stands at $39 million and $42 million.
While the Australian Securities & Investments Commission (ASIC) has not yet investigated this large drop, it well may do so in the near future.
Murray Goulburn chairman Philip Tracy claimed no investigation is necessary.
“Ultimately we reflect on the processes. There was nothing we could have done any quicker,’’ Tracy told The Australian. “With everything we had in front of us we were comfortable with the forecast we made at that time in the prospectus.’’
The LactiCyte from Page and Pederson can undertake somatic cell counts for fresh and preserved cow, goat, sheep, and buffalo milk in less than sixty seconds.
The LactiCyte from Page and Pederson can undertake somatic cell counts for fresh and preserved cow, goat, sheep, and buffalo milk in less than sixty seconds.
Using a fluorescent microscope technique and magnification approach, the actual cells counted are recorded by a charged-coupled device (CCD) camera and saved to an internal database.
Somatic Cell Testing is critical in monitoring dairy herd health and ensuring quality in milk and milk products.
Dairy processors need to know the level of somatic cells present in milk, as high counts are linked to reduced yields, impacts on organoleptic qualities, and reduced shelf life.
At the farm level, somatic cell testing can be used to indicate the presence of mastitis in individual cows, or assessing the entire herd. Furthermore somatic cell counts can indicate whether medical treatment has been effective, or whether further intervention is required.
The most common test method currently available is microscopy, but this method can often be inaccurate due to subjectivity and may require the use of hazardous chemicals. Alternatively sending samples to an external lab will result in delays for results.
The LactiCyte has a cell counting range of 100,000 to 10,000,000 somatic cells per ml. It is compact, cost effective, and provides immediate results to make timely decisions either at the farm or processing plant.
A new South Australian milk brand released over the weekend is sourced only from two local dairy farms and available only through locally owned retailers and food service outlets.
Adelaide Now reports that South Australians can purchase the ‘Adelaide Hills Dairies’ brand through Foodland and IGA stores as well as some independent shops, and cafes and restaurants. The products will be made at at B.-d Farm Paris Creek’s processing facility in the Adelaide Hills
According to Ulli Spranz, managing director of both Adelaide Hills Dairies and B.-d. Farm Paris Creek, there are plans to also begin selling yoghurts and cottage-cheeses carrying the Adelaide Hills Dairies brand later this year.
“Consumers can be absolutely assured that by supporting this brand… they will also be supporting an important part of the South Australian economy, while enjoying premium local dairy products,” Spranz told Adelaide Now.
In February the South Australian Government granted B.-d. Farm Paris Creek a $900,000 Regional Development Fund grant to support the company’s $6.5 million into its Meadows-based operation.
The project will place the company among only a handful of producers in Australia capable of ESL fresh milk production.
Treasurer Scott Morrison has approved the $280 million sale of Australia’s largest dairy farming business to the Chinese-owned Moon Lake Investments.
Morrison announced he had agreed to the acquisition of the land and assets of the Tasmanian Land Company (TLC), including the Van Diemen’s Land Company (VDL) from New Zealand’s New Plymouth District Council (NPDC), subject to conditions on taxation.
He said his decision was consistent with the recommendation of the Foreign Investment Review Board.
Moon Lake is owned by Lu Xianfeng. Lu is the managing director and executive chairman of Kresta Holdings Limited, Australia’s largest window-covering retailer.
VDL, which dates from 1825, owns and operates 25 dairy farms in Tasmania, milking some 18,000 cows. The Treasurer pointed out that “VDL is currently a foreign-owned company that has always been owned by foreign residents”.
Morrison said he had considered the national interest test, including the likely impact on local jobs and increased investment to support economic growth. “In particular, the national interest test requires consideration of the impact on taxation revenue,” he said.
Approval of Moon Lake’s application is the first under new conditions, requiring it to comply with Australian tax law, Australian Taxation Office (ATO) directions to provide information about the investment and to advise the ATO if it enters into any transactions with non-residents to which the transfer pricing or any anti-avoidance measures in the tax law might potentially apply.
Morrison said Moon Lake had guaranteed all VDL employees would be offered jobs on terms no less favourable than their present ones.
It had also committed to investment projects on the VDL farms “which will provide additional economic activity to the Tasmanian economy, and based upon Moon Lake’s estimates will result in a near doubling of employment at VDL”, Morrison said. “This will guarantee more than 140 local jobs, generate an intended additional investment of over $100 million and an expected additional 95 jobs.”
Moon Lake planned to continue to supply the milk under the present contractual terms. This meant the supply of milk and milk products would not be affected – indeed supply might increase with more investment, Morrison said.
He said the VDL land had important cultural and natural heritage significance.
“Moon Lake has committed to honour the terms of all environmental and cultural agreements entered into by VDL, including with the local Aboriginal community. This also includes the ‘in principle’ approval for the construction of a Devil Proof Fence at its Woolnorth property to help reduce the spread of Devil Facial Tumour Disease among the Tasmanian Devil population,” Morrison said.
Businessman Dick Smith condemned the approval as a “disaster”. “You may as well not have borders if you are going to sell everything off,” Smith said.
The decision follows controversy about the purchase and comes before Morrison must decide on whether to approve the sale of the pared-down Kidman empire to a Chinese buyer. Earlier he rejected the Kidman sale particularly on the security grounds that Anna Creek Station, the biggest working cattle station in the world, overlapped the Woomera Prohibited Area. Anna Creek has been removed from the restructured bid.
Launched this week, Anchor Milk has arrived in Australia and brought with it a new microfiltration technology, which will initially be available in Victoria.
While all milk is pasteurised Anchor goes one step further by using microfiltration to reduce the naturally occurring bacteria in pasteurised milk that causes spoilage by an additional 95 per cent.
It does this by pushing the milk through a special ceramic filter, creating a beautifully fresh tasting finished product that has an extended shelf life of 21 days. Normal pasteurised milk has a shelf life of 15 days.
No additives or preservative are added to Anchor milk to achieve this longer shelf life. In fact, it’s all about what’s removed to create the very finest filtered product.
While Anchor offers a similar nutritional profile to other supermarket milks, the big difference is in its taste.
“Anchor is clean on the palette and has distinctly no after-taste – even after a week or two in the fridge,” said Kiril Simonovski, Director of Marketing at Fonterra. “It really is beautiful milk and we think it offers consumers the best of both worlds through its superior taste profile, combined with the convenience of an extended shelf life.
“We know consumers shop by used-by-date because they want the freshest product. We think Anchor will appeal to discerning households looking for a premium product with a recommended retail price of only slightly more than regular milk,” Simonovski added.
CSIRO Food Manufacturing Leader, Darren Gardiner, said microfiltration had been received well in other parts of the world.
“While we’re all familiar with the concept of filtration when it comes to water and coffee, the additional step of filtering out the unwanted bacteria in milk before pasteurisation is a major development in fresh milk,” Gardiner said.
Anchor Milk is sourced exclusively from a small number of farms in Western Victoria, located close to where the milk is processed. These farmers deliver high quality milk all year round.
a2 Milk's half year profit has risen dramatically to $NZ10.1 million ($A9.34 million), on the back of demand for its infant formula.
The record half-year profit for the six months to December 31 compares to the profit of $NZ125,000 for the previous corresponding period.
In addition, the company’s total revenue rose to $NZ139.1 million, an increase of 86 per cent compared the previous corresponding period.
Revenue from sales of a2 Platinum infant formula across Australia, New Zealand and China were $73.9 million, an increase of 340% on the previous period. This compares with previously advised sales for the four months to 31 October 2015 of $38.0 million.
The company said it now expected full-year operating profit to be in the range of $45m to $49m, with revenue of $335m to $350m.
“The Company’s strategic agenda has been focused on growing and broadening the ANZ milk business and developing growth opportunities in select international markets,” commented a2 Managing Director Geoffrey Babidge.
“Following a period of development, a2 Platinum infant formula has become a significant contributor to growth and earnings in ANZ and China, which we see continuing. In addition, we see positive prospects for growth of a2 Milk whole milk powder, which was first launched late last financial year.
“We are pleased with the growing level of distribution for a2 Milk in the state of California and the repositioning of our brand in the UK during the period.”
Coach House Dairy Chocolate Milk by Nulac Foods has won a gold medal and the champion award for the best flavoured milk at the Sydney Royal Awards.
Coach House Dairy Chocolate Milk entered the marketplace in May 2015 and has gone from strength to strength.
The company recently released two new flavours – Cold Drip Coffee with Milk and Café Mocha. Both were also successful at the awards, winning silver and gold medals respectively.
“With increasing demand for these new flavours, and of course the original real chocolate milk, the team here at NuLac Foods has doubled in size since last year,” said NuLac Foods owner John Gommans. “Fresh Milk trucks are lining up daily and we are loving every minute of it.”
NuLac Foods is based in Keysborough, Victoria and produces many other dairy products that also won medals at the awards. Their family brand CapriLac Goat Products won gold and silver awards for their range of goat yoghurts and milk.
The newest addition to the NuLac family, Vitality on-the-go, a yoghurt based women’s recovery drink, won a bronze medal.
“This fresh product has not been seen in the Australian marketplace before and is perfect for having on the go,” said Gommans.
The latest New Zealand Manufacturers and Exporters Association (NZME) survey of business conditions in December showed a 9.02 per cent increase in domestic sales almost made up for a 10.76 per cent drop in export sales.
Chief executive Dieter Adam said despite net confidence falling to 18, down from 24 in November, manufacturing had been a "relatively good space" for the last 12 months.
The current performance, change and forecast indexes were all over 100 in December, indicating expansion.
"The forecast index, which indicates investment, sales, profit and staffing expectations, stayed high at 107.33, coming off the back of the most positive result recorded since 2004 in November, so there remains a fair chunk of optimism for the future."
"We find manufacturers are saying they have a bit of breathing room to employ more staff, but also to be able to invest. That's the critical thing because to survive in the medium to long term, manufacturers need to automate more, and to update their machinery."
Adam noted that last week's Overseas Merchandise Trade release by Statistics New Zealand showed even brighter results for exporters.
"For example, export values for electrical machinery and equipment manufacturing improved 9 per cent on the previous month and 11.5 per cent year on year, while logs, wood, and wood article manufacturing increased 25.1per cent on last month and 13.8per cent year on year."
The really big influences on manufacturing were the uncertain global economy and the value of the dollar, he said, and uncertainty in world markets tended to push down the New Zealand dollar which benefited exporters.
"Having said that, the underlying causes of the global uncertainty is not good news for exporters because people tend to hold back on purchasing our goods overseas."
Adam said exporters would love the US dollar to be closer to 60 cents but the really big problem was the relatively high value of the Australian dollar.
"Forty per cent of our manufactured exports go to Australia and anything over 90 (cents) is really eating into our competitiveness. When it was 85 (cents) people were a lot happier. "
However, the strength of the domestic economy was helping make up for the loss of export sales. It was a little surprising that the drop in dairy prices, and the consequent effect on the rural economy, had not had a bigger impact on manufacturing.
In some instances sales of products, such as hoses used to wash down dairy sheds, dropped quite quickly when farmers "shut their pockets."
If farming losses continued into the next milking season, Adam said, the consequences could be much more serious because farmers didn't have any cash reserves left.