Cream of the crop
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Deregulation, drought and discounting have taken their toll on the Australian dairy industry, but they have also created a crop of entrepreneurial and resilient farmers who have re-positioned their industry and taken control.
The industry is hugely diverse explains Joanne Bills, Manager, Strategy & Knowledge at Dairy Australia, the national services body for dairy farmers and the industry.
It is mainly owner-operated and pasture-based, with the average farm having around 220 cows, but in terms of feeding, milking, managing animals and storing a perishable product, it’s an intensive management task, she says.
The other complexity in dairy farming is that drinking milk as a product can’t be sold raw, it has to be processed. In particular, it must be pasteurised—or heated—to kill any bacteria. The benefit of this is that, in order to maintain the freshness of the milk, much of this processing happens close to farming areas and so generates economic activity and employment in country regions.
But many dairy farmers will say the biggest hurdle in the last decade has been the deregulation of the industry in 2000. Deregulation meant the regulation of sourcing, manufacturing and pricing of drinking milk ceased. As the price paid for milk at the farm gate dropped, many farmers left the industry. Dairy Australia says the number of dairy farms has dropped two-thirds between 1980 and 2010—from more than 21,000 to around 7,500. The upside was that it forced many farmers to look for other ways to make their farms profitable.
John Fairley, a sixth-generation dairy farmer from Picton on Sydney’s outskirts, is one such farmer.
‘After deregulation we were then struggling with drought and we thought, why sell our milk for next to nothing to a big processer when we could bottle it ourselves and start making farming a viable way of life again?’
The Fairley’s built a processing plant and began bottling and selling their own milk in 2004 under the label Country Valley.
‘We don’t use additives in our products, 100 per cent pure milk that goes straight from the cows to the plant and then out to our customers, with very little transport involved,’ John says.
The gamble has been so successful that Country Valley has won many awards including most recently Champion Milk for its organic milk and Champion Yoghurt for its natural yoghurt as well as Most Successful Milk Exhibitor at the 2011 Sydney Royal Cheese and Dairy Produce Show.
Post deregulation, the drastic discounting of milk by the major supermarkets to $1 a litre has brought a new challenge to the dairy industry this year as market forces turn drinking milk production into an increasingly marginal business.
Reducing the price of milk was the first step in the supermarkets’ drive to give shoppers value and increase the market share of their home-brand products—and it has worked. Sales of Woolworths’ home-brand milk has increased 5–6 per cent this year according to the supermarket giant.
Although the supermarkets say they have absorbed the losses, they will naturally look to minimise this revenues as contracts with processors are renewed says Bills.
While the industry has moved away from farmer-owned co-ops processing and distributing local milk to the multinationals, there is a renaissance of local farmers re-embracing this more traditional approach.
Karl Johnson from Over the Moon milk near Dungog in the lower Hunter Valley has developed a local milk business. Johnson buys milk from a dairy farm owned by Ian and Sue Lindsay whose herd of Jersey cows are grass fed on the lush pastures of the Hastings Valley near Wauchope. Over the Moon produces a range of dairy products including non-homogenised whole and reduced fat milk, flavoured milk and yoghurt that Karl distributes through farmers’ markets and across Sydney. ‘It is made in the old-fashioned way, one small batch at a time, and is not mixed with milk from other dairies,’ Johnson explains.
The milk is processed at Luskintyre Dairy near Lochinvar in the Hunter Valley, also the home of Udder Farm milk and cheese, which is owned and operated by the Haines family.
‘We use Jersey cow milk which, although they produce less, is great quality,’ son Jamie Haines from Udder Farm explains. Mr Haines and his family milk their own cows twice a day every day and bottle their milk two to three times a week, depending on demand.
They sell their Udder Farm milk at markets at The Entrance every fortnight and do a milk run around corner stores in the Hunter area.
‘The milk is un-homogenised,’ Jamie says, ‘so the sweet cream sits on top. People think it’s off when they first see it, but they can’t believe the flavour when they drink it.’
The difference is in the processing. Regular or whole milk is standardised to a milk-fat content of 3.4 to 3.6 per cent, usually by removing the fat completely and then putting it back into the milk depending on the product being created. ‘We don’t do this,’ Haines says. ‘We only remove what we don’t want so the milk stays minimally processed.’
‘I’m constantly getting enquiries from farmers who are looking for alternatives to selling their milk to the big processors,’ Haines says. Along with Karl Johnson the entrepreneurial pair are looking at developing their milk further in 2012 with a farmer-friendly product. ‘If we don’t do something, we’re going to lose our small diary farmers,’ Johnson says.
With these high-profile issues, the industry has been scrutinised by government and regulators. In July, the Australian Competition & Consumer Commission cleared Coles of predatory pricing. A Senate inquiry looked at the issue of milk discounting and its effect on farmers. It released its findings in November saying there was no major impact.
The Australian Dairy Farmers (ADF), the industry’s lobbying body, believes government involvement is the only way Australian dairy farmers can have a chance. It believes a Supermarket Commissioner or Ombudsman should be appointed as well as an enforceable code of conduct for supermarkets.
But dairy farmer sustainability is not just about milk production, there is also environmental stewardship and animal welfare.
One such issue pottering around the milking shed is the treatment of bobby calves—the calves of milking cows, bred so the cows continue to generate milk. While female calves are usually kept to replenish the herd, the male bobby calves are sent to abattoirs for slaughter.
Many groups are concerned about the welfare of these young animals removed form their mothers, mainly because there is no national standard for their care. With the government unable to come to a decision on what these standards should be earlier this year, the industry proposed a maximum of 30 hours without food or water, alongside animal welfare standards for transport of livestock, which were developed in 2009. This is now being implemented across the industry.
Although drinking milk is looking wobbly, there is a strong future in the dairy sector. Drinking milk makes up around 25 per cent of the industry’s output according to Dairy Australia, but it is closely followed by cheese making and butter.
Natural butter production is having a resurgence with consumers questioning the health aspects of margarine. ‘Butter is considered more of a natural product and with the explosion in people’s interest in cooking, butter offers taste,’ Bills says.
The specialist cheese sector is also seeing great success, particularly for export.
‘Australia is seen as a supplier of good-quality food’, Bills says, ‘and growth is likely in manufacturing. There is demand in China and the Middle East and developing countries,’ she says.
WORDS Diane Jardine PHOTO Kymba
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Published at the beginning of each season, Sprout is a celebration of local food, producers and cuisine. It is about living sustainably through promoting fresh, seasonal produce from Sydney region farms and encouraging people to make a difference by growing their own food and making sustainable food choices.