• INQUIRY INTO SUSTAINABILITY OF THE DAIRY INDUSTRY IN NSW

    16th November 2018

    One of Mark Pearson’s responsibilities (and a privilege) is to sit on the Legislative Council’s “Industry and Transport” Committee.  Recently the Committee conducted an inquiry into the sustainability of  dairy in NSW.  This gave Mark the opportunity to ask questions regarding intensive dairies, bobby calves and whether the dairy industry has considered transitioning to plant based milks.

    INQUIRY INTO SUSTAINABILITY OF THE DAIRY INDUSTRY IN NSW

    16 November 2018

     

    Mr Greg McNamara – Acting CEO and Chairman, Norco Cooperative

     

    The Hon. MARK PEARSON: If you were to step back and view the dairy industry objectively, its viability and, as you said, the current lack of good leadership, and also climate change and Australia’s environment, has Norco or the dairy industry ever considered moving away from animal-based milk towards plant-based milk using the same properties that are thriving, or not thriving in this case? Have you considered that it might be wise to move towards a plant-based milk industry—although I do not think we can use that term legally? The plant-based market is flourishing.

    Mr McNAMARA: We sell plant-based milks. If a customer wants a plant-based product, we can provide it. We are not opposed to plant-based products, but the definitive answer is that we have not encouraged farmers to plant pecan or almond trees to offer those products.

    The Hon. MARK PEARSON: We are hearing that the dairy industry is in crisis. Would that be wise advice? Obviously Norco has not turned its mind to that.

    Mr McNAMARA: It is about a diversity of income streams that allows farmers to spot. The reality is that Norco would not survive under that model because not enough consumers have moved down that path. There is an increasing number of people who would prefer to drink a plant-based product, and that is fine. But it is not a big enough industry to support 200 farmers at this time. That evolutionary process may take 10 years to 15 years. Planting trees and harvesting the plant-based material may take a significant amount of time.

     

    Mr Colin Thompson – Vice Dairy Chair, NSW Farmers

     

    The Hon. MARK PEARSON: Mr Thompson, you were talking about what you did personally, but I think it might be a good example. You packed up from the coast and moved to Cowra and invested in a dairy there, at a time when the dairy industry’s future was in question as being a viable economy for anybody who was investing. Is that a risk that other dairy farmers are taking? How did you assess that risk?

    Mr THOMPSON: Everyone saw deregulation in a different way. I saw it as an opportunity. Under regulation we had a quota system but those quota systems tied up a lot of capital on dairy farms. Under deregulation we had our compensation package. Some farmers chose to take that compensation and exit the industry with dignity. I still saw potential in the dairy industry, and particularly inland New South Wales. And so I chose to relocate to Cowra in the central west and start a new facility, start a completely different style of dairy farming to the traditional pasture-based farming, a free stall dairy.

    Since that time, probably during that time, some of the issues that I came up against were, it took seven years to get approval. There were three court cases in the Land and Environment Court. It really highlighted the lack of planning in New South Wales for dairy farms inland. Since that time, we have developed a completely new system. We regularly have other farmers visiting our system. I had to go offshore. I had to go to the United States to get expertise to learn how to develop this new system. It is a system that has great potential to grow and make our New South Wales industry more sustainable.

    The Hon. MARK PEARSON: Is it an intensive system?

    Mr THOMPSON: It is an intensive system, absolutely. Yes, there was a risk. I do remember going to four banks to get finance. Three of them said no, and one said, “Yes, I will give it a go.” So I went. Still there.

     

    Mr Scott Hansen – Director General, NSW Dept of Primary Industies

    Mr Alex Russell – Manager Intensive Livestock, NSW Dept of Primary Industries

     

    The Hon. MARK PEARSON: Mr Hansen, you said that when there have been situations in areas where there has been an oversupply of milk it has had a critical effect on the pricing. But then you said that because of integration it has taken the valve off that particular problem in that area where there is an oversupply. Can you explain how that has happened?

    Mr HANSEN: I guess that that is just a reflection of the fact that, with our hygiene standards, our food transport standards, and the logistics changes that are now in place fresh milk is not as geographically isolated as it once was. It is hence able to be transported to fill holes in other markets if their supply is in some—

    The Hon. MARK PEARSON: Right. That has clarified it. Mr Russell, at what point does a typical dairy become an intensive dairy, and what factors are brought to bear on a dairy to move in that direction?

    Mr RUSSELL: Thank you for the question. I think it is quite difficult to define a particular dairy as being intensive or otherwise. I guess the thing about dairying is that it requires a really high level of management input. For me that is what defines it as an intensive production system—the fact that it requires that high level of management input. There are different production systems in Australia. Some of those involve what we call a partial mixed ration production system or a total mixed ration production system. That reflects how much time the animals spend on pasture compared to being fed from a trough, say. But, really, I see it as an intensive industry because of that high level of management input that makes it quite challenging.

    The Hon. MARK PEARSON: It is not because of the amount of space—the stocking density—it is more a matter of the intensity of the work by people. That is how—

    Mr RUSSELL: That is my view. And the inputs that are provided. So the less time the animals spend on pasture the more there is a requirement to cut and conserve forage and bring that to the cattle or to spend money on buying inputs—grain and fodder.

    The Hon. MARK PEARSON: I think there was a period of time—I do not know whether we are still doing it as much—where we were exporting dairy cattle as breeding stock, mainly to Asia and I think perhaps to the Middle East. Is that continuing. If it is, is it having an impact on the economics of the dairy industry in Australia, in terms of our exports of dairy?

    Mr HANSEN: Not at the same rates as in previous years but there continues to be a high-end value dairy heifer air shipment into Asian markets that are looking to grow their own genetics and their own herds. Some of the speakers after us might be better placed to talk on that front. What we are seeing, though, is a significant increase in the integration between dairy operations and the meat operations in terms of the opportunity to supply calves into beef production systems. That is largely because we have seen, exacerbated by the last 12 months, a significant reduction in the national herd whilst there is incredible demand for meat globally, continuing to grow.

    Dairy farmers, while focusing on the purpose of producing milk, obviously have opportunities with the animals they are producing in terms of the meat industry as well as the fodder they are producing in terms of that fodder being a potential source of income if they are able to produce surplus to requirements. In the last 12 months that has not been the case. Dairy farmers are very good at looking at that business integration and looking how they maximise the resources they have available to them to make their businesses as sustainable as possible.

    The Hon. MARK PEARSON: So, the export of dairy breeding stock is not having a serious impact on the economics of the dairy industry nationally, as opposed to—

    Mr HANSEN: The alternative sources of income into our farm monitor project figures suggest that it is not a significant driver in terms of the profitability. However, that fails to take into account that for certain businesses at certain times that could well have been a defining moment, or an opportunity that has enabled them to earn income that otherwise they would not have been able to. So for individual businesses you can only assume that there are some that are very thankful and have been reliant upon that additional income source, but when you look at it collectively it is a small proportion in terms of farm-gate income.


    The final report can be read here:

    https://www.parliament.nsw.gov.au/lcdocs/inquiries/2514/Report%20No%2051%20-%20Sustainability%20of%20the%20dairy%20industry%20in%20NSW.pdf

     

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