AGRICULTURE: by News WeeklyNews Weekly
ABARE report underestimates dairy backlash
, February 24, 2001
The country backlash against the Federal Government is likely to continue, if the recent Australian Bureau of Agricultural and Resource Economics (ABARE) report on the deregulation of the dairy industry is anything to go on.
Of 111 dairy regions examined, ABARE found that in 57 regions the impact of deregulation was moderate to high on farmers and moderate to high on their country regions. In another five regions the effects were high on both farmers and their regions. And the ABARE report may well have underestimated the impact of deregulation.
Up until deregulation in July last year, an agreement between the states saw the dairy industry regulated on a state by state basis. Milk to the domestic liquid milk market was sold only into that state and was not shipped across state borders. Effectively, the states had quotas or allocations on production for the fresh milk market.
Late in 1999, Victorian farmers voted to deregulate their state's dairy industry. Two factors decided their vote. First, Victorian farmers are the most efficient mainland producers and stood to make the most out of deregulation by gaining access to the lucrative, large fresh milk market in NSW.
In the short term they would make money, but in the longer term, higher returns will only see more Victorian milk produced forcing down the price of milk and threatening the viability of farmers, small and big. Such is the fate of many deregulated agricultural industries.
This was plainly understood by many Victorian farmers. So why did they vote for deregulation overwhelmingly? Because they were essentially being asked to support dairy deregulation with a $1.6 billion adjustment package, or to support deregulation with no adjustment package.
ABARE's report on deregulation is based on data collected just five months after deregulation. It shows that 30 percent of farmers did not expect to be in the industry in five years time, while 20 percent did not believe their existing property would still be used in dairying in five years time. This represents a sharp acceleration in the number farmers leaving the dairy industry. It also showed that the drop in fresh milk prices in the supermarkets will cost dairy farmers $170 million in revenue in the first year of deregulation.
ABARE also compared farm incomes in different regions for 1999-2000 and 2000-2001. In some areas, it found that the income from the sale of culled cattle and calves had doubled in 2000-01 over previous years.
According to prominent Gippsland farmer, John O'Brien of Cowwarr, "this is a glaring survey error. ABARE only interviewed 180 out of 12,888 farmers across Australia.
"Obviously a couple of farmers ABARE interviewed sold off a sizeable proportion of their herd and doubled their revenue from cattle sales. This makes the average farmers in these regions look like they have incomes $15,000 to $18,000 higher than they really have. Its just plain wrong.
"These errors inflate farm profits. In fact, in some regions this year's farm business profits will be in the red."
Interestingly, the ABARE report spells out what is really behind dairy deregulation - National Competition Policy (NCP). It shows that over the seven years from 1999-2000 to 2005-2006, the Federal Government will pay the states $4.9 billion for implementing deregulation reforms under NCP.
Except in WA, none of this is being used to help dairy farmers.