In this era of the death of neoliberalism, when the party of the right vies with progressives to be the greatest interventionist, the most aggressive trust-buster and the toughest regulator in politics, there’s one industry where it’s still political fashion to pander to business at the expense of consumers: agriculture.
Yesterday, the ALP tried to introduce a bill into the House of Representatives establishing a process for the Australian Competition and Consumer Commission (ACCC) to set a floor price for milk. That comes after a kerfuffle over the Woolworths shareholder and Agriculture Minister David Littleproud calling for a boycott of Woolworths rivals Coles and Aldi on the basis that they wouldn’t follow Woolies in increasing milk prices by 10%. Ten per cent is more than five times the current rate of inflation, at a time when wages are growing at around 2% (Littleproud has since dumped his shares).
The ag minister, however, was on more solid footing when he described Labor’s floor price proposal as “harebrained”. Indeed, one might credit him on being polite about it. Imagine Labor proposing a “floor price” for bank fees. Or for petrol. Or for iPods and phones.
We’re not supposed to think of agriculture in the same terms as other industries. It’s a myth, long peddled by the Nationals, that farming isn’t just another industry but a collection of hard-working heterosexual families doing it tough in the bush. We’re supposed to suspend our scepticism of industry welfare when agriculture is invoked, although these days in the name of “food security” as much as reactionary fantasies of pastoral idylls.
A 2014 Productivity Commission report on the dairy industry dispelled those myths. Dairy manufacturing is corporatised and dominated by foreign firms.
While there were over 400 dairy manufacturers in Australia in 2012-13, the six largest firms (Murray Goulburn, Fonterra, Lion, Warrnambool Cheese and Butter, Parmalat and Bega Cheese) processed about 90 per cent of Australia’s raw milk supply. Lion and Parmalat predominantly produce drinking milk for the domestic market, whereas the other four major manufacturers are focused on heavily traded dairy products. There is a high level of foreign ownership in Australian dairy manufacturing: four of the six largest dairy manufacturers are owned by foreign corporations or cooperatives… The role of Australian farmer-owned cooperatives has declined over time. In 1999, three of the five largest dairy manufacturers were Australian cooperatives; in 2014, just one of the six largest dairy manufacturers is an Australian cooperative — Murray Goulburn.
The point about exports is crucial to any discussion of “farmgate” prices. About 40% of dairy products were exported when the PC examined the industry (the 2016-17 figure was 37%).
International dairy markets are highly competitive. And that means “the integration of Australian dairy manufacturers into world markets means that domestic dairy product prices (and farmgate milk prices) are strongly influenced by international markets and prices.”
And you thought it was the evil Coles and Woolies, right? The PC, by the way, said that increased electricity costs since 2006 were the key factor in making dairy manufacturing more expensive; it also named higher labour costs than in other countries, and the impact on innovation and efficiency of subsidies and other forms of farm welfare, which keep less productive, underinvesting farms in business. But as the PC notes, Australia has lower farmgate prices than many other exporting countries because we’re more efficient, and this is an advantage, not a disadvantage, because it means we can out-compete other countries.
And any subsidies for dairy farmers, by the way — whether voluntary or enforced — will flow almost entirely to Victoria, which dominates dairy production in Australia, accounting for around twice as much as the rest of the country combined. Maybe Labor believes a floor price proposal might help it pick up some regional Victorian seats that normally might be beyond its reach?
If consumers want to pay more for milk because it’s the ethical thing to do, then they should switch to soy milk or the growing range of non-dairy milk products. According to the RSPCA, the Australia dairy industry slaughters 450,000 bobby calves every year. Bobby calves are the calves bred so that cows will lactate. They’re removed from their mothers within 24 hours of birth and fed once a day until they are slaughtered either on-farm, or transported elsewhere. The dairy industry views them as a “waste product”. Dairy is a profoundly unethical industry. And the supermarkets have nothing to do with it.
What do you think of Labor’s idea? Write to [email protected].