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SELECT COMMITTEE ON AGRICULTURAL AND RELATED INDUSTRIES - 06/10/2009 - Food production in Australia

CHAIR —We will now hear from witnesses who wish to make a short statement to the committee.

Miss Carter —I am aware that you have copies of this document submitted by my parents. I am here on their behalf. They were dairy farmers on King Island in a unique position where they leased the Kiama dairy property off National Foods. They also sold their dairying business, being the cows and infrastructure, to National Foods as they left. I was asked to get them to submit what they considered to be breaches and misrepresentations in National Foods’ behaviour, all of which are itemised on here. If you want greater detail, please ask. There is one thing that is not included there, and that is the fact that when they were in the process of selling the business, National Foods had their own valuer come in and value a large portion of the dairy herd at cull cow price. We then had two independent valuers who valued the cows at double the National Foods price. The local veterinarian, the only veterinarian on the island, while he was preg testing the herd said ‘the herd was in bloody good nick’.

I say on my parents’ behalf that National Foods abused their authority on King Island and abused their position on King Island and that we are not unique. I have asked if there have been other people from King Island representing themselves here and the answer has been no. I would be inclined to say that that is the case because they are too scared; they do not have an option—they are on an island and there is no choice. They have the monopoly and they do what they like. Do you have any questions about what is in this document?

Senator STERLE —I have only just seen it, unfortunately, Miss Carter. It has just been handed to us, so we are shooting blind.

Senator MILNE —I could ask a question in relation to the promises that were made about the calf-rearing facilities and so forth. Presumably none of those were made in writing?

Miss Carter —No.

Senator MILNE —Obviously they have not been delivered. Were any of these promises when they were luring your parents to go into this arrangement put in writing?

Miss Carter —Nothing at National Foods is put in writing. The inherent problem with not putting anything in writing is that there is no comeback, there is no accountability, and so the farmer has not even a leg to stand on.

Senator MILNE —That is right.

Miss Carter —They sold over $1 million worth to National Foods. There is not even a receipt.

CHAIR —Who is they?

Miss Carter —My parents. They sold their dairying business to National Foods. We cannot even prove it was sold. There is no invoice, nothing.

Senator STERLE —They got the money?

Miss Carter —Yes, I got the money.

Senator STERLE —I guess you could look at some of the banking and things—

Miss Carter —There is no deed of sale.

CHAIR —Wouldn’t the tax office want to know what the money was for?

Miss Carter —That is what the accountant is for. We have tried, believe you me.

Senator MILNE —Tried to get a deed of sale?

Miss Carter —Correct.

Senator MILNE —Surely, legally, they have to provide one, I would have thought.

Miss Carter —They have their own legal department. I do not know.

CHAIR —We will ask them for you.

Senator MILNE —We will pursue that.

Miss Carter —I know that this is predominantly for farmers who are not getting a fair price for their product. However in saying that, my parents have been out of National Foods Group for 18 months. They still have not been paid a retrospective payment, which is to the tune of approximately $120,000. If you read ‘Sale of Elk Enterprises Pty Ltd business to National Foods’, it says, ‘No retrospective payment’ and it continues: ‘Retrospective payments were to be written in the sale documentation of Elk Enterprises Pty Ltd as agreed by Jon Perrett, who said, “I will gladly put it in. However, there will be none.”‘ That is, not for us, not for anybody. There is no retrospective payment.

Then a retrospective payment was made. Another supplier on King Island informed us that National Foods had changed the wording to ‘a continuation of supply or loyalty payment to stop Elk Enterprises getting the retrospective payment.’ The payment was made to everybody else. It was paid on the volume of milk produced for the 12 months prior. They produced it, they earned it, they deserve it: it is theirs.

Senator COLBECK —Did the other suppliers continue to supply National Foods?

Miss Carter —Yes.

Senator COLBECK —But the difference was that your parents ceased supplying National Foods—is that correct?

Miss Carter —Correct. But it was a retrospective payment based on the volume that had been supplied for the 12 months prior.

Senator COLBECK —So did somebody else continue to work on that farm and supply from that property when National Foods—

Miss Carter —They had problems getting people to take over my parents’ business. Nobody wanted to do it. Consequently, they left their management to run it. It is my belief through my experience that National Foods do not have a total grasp of the costs it takes to operate a dairy farm. Well, they do and they don’t. I have two cases here which are very valid, one being X staff phoning and saying, ‘I have been told by National Foods that I cannot calve this cow at night because it is against occupational health and safety to work in an area that is unsafe and not properly lit, so I have to go home.’ The problem with that is that you cannot do the springer beat. You cannot get herd 1 in at one o’clock and you cannot get herd 2 in at quarter past three in the morning and when you have got 1,100 cows that is a great cost in labour alone.

CHAIR —We are going to have to conclude because we have got to get on a plane because we have got a hearing in Canberra in the morning. We had to limit you to five minutes and your five minutes is up—

Miss Carter —That is a shame because—

CHAIR —We will see if we can come back to you. What would you like to say, Mr Jones?

Mr Jones —I understand that the spotlight here has been very much on National Foods. However I am here to address the meeting to shift the focus to Fonterra. I am not sure how aware you are, but since February we have been paid 26c a litre, which is well under what National Foods are currently paying annually at the moment. The focus has very much been on National Foods, however the dilemma for Fonterra suppliers—and Fonterra is a large multinational—is that we are well under the cost of production. I need to get the message across that it is quite serious and very much an issue. I want you to go away thinking that this is just not a one-company issue here—

Senator COLBECK —We do understand that and that is why, presumably, most of us will be back in November with the second inquiry that has been referred to Economics References Committee, which is looking at the dairy industry broadly. It is looking at the relationships with these supermarkets, the relationships across the industry, and the concentration of ownership, and Senator Milne, Senator O’Brien and I have jointly sponsored a motion that has referred this issue to the economics committee so that we can have a look at the broader industry. We do understand that this is not just about National Foods.

Mr Jones —The thing about this is that there is a whole range of issues which drive the price for Fonterra Australia that need to be addressed.

Senator COLBECK —Could I urge you to consider documenting what you are saying so that when we come back in a month’s time we can address this more broadly.

CHAIR —We will invite you to give us evidence via phone hook-up to this committee. I am not worried about the other committee. We will gladly receive your evidence. I apologise that we are running out of time. We might be able to do it on the 12th.

Senator STERLE —I am not a Tasmanian. I thought Fonterra would have had the wind blowing up their backside, that they are great, so it is lucky you told us that.

Mr Jones —Thank you.

CHAIR —That was not the impression I had.

Mr Gribble —I would like to add to what Simon said about Fonterra. I understand that, as far as their exports are concerned, 30 per cent is to whole-milk products, another 30 per cent is to related products like cheese, butter et cetera, and the remaining 30 per cent or thereabouts is for milk powder, which is dependent on the world’s depressed commodity prices at the moment. Comparing that to New Zealand, Fonterra pay a $5.10 per milk solid payout against Tasmania, which is a $3.60 payout. On top of that, in New Zealand they get a 55c—I do not know the exact term—quality payment. It is only simple mathematics to work out the difference between New Zealand and Australia. New Zealand is more wholly dependent upon the world’s commodity prices, more so than Australia. Fonterra Australia would be more in a position to pay more than New Zealand.

CHAIR —They will also be advantaged by the treatment by their government of the industry in New Zealand, under the emissions trading regime, compared to what we are up for.

Mr Gribble —Which has been reviewed in New Zealand to make it a more workable arrangement.

Senator MILNE —Are you saying that Australian dairy farmers cross-subsidise New Zealand returns?

Mr Gribble —I would not know, but it almost looks like Australia is subsidising New Zealand.

Senator MILNE —That is what I am trying to establish.

CHAIR —We will come back to you over the phone.

Mr Synfield —I am sorry to steal time. Senator O’Brien was talking about the fact that production has essentially doubled in the number of years, despite the takeover of land by MIS. A lot of that is about market forces, but there is a distorted market force. The fact is that good, high-production dairy land in high-rainfall areas has been taken over by MIS. Dairying is going to other areas and is having to establish itself with high infrastructure costs by having to put in centre pivots and a whole range of things, adding to the cost for a dairy farmer which would otherwise not exist if they were in the better rainfall areas. We have taken out of production areas that would have inherently lower costs to facilitate an industry that has been driven by forces that would not otherwise exist, and the land prices have risen. The government in Tasmania is spending a fortune on establishing irrigation schemes in what I would consider to be marginal areas in lots of cases to—

CHAIR —Western Australia is putting trees where there should not be and the plantations are failing.

Senator O’BRIEN —So we should not open up agriculture in the midlands or north-east Tasmania?

Mr Synfield —I am not saying that at all. Today we are talking about an industry that is crippled by the income not meeting the cost of production and we have an industry that really should not have been allowed in the first place to—

CHAIR —Miss Carter, do you want to finish your contribution?

Miss Carter —I was in the process of clarifying why I feel that National Foods do not have an entirely accurate grasp of the costs associated with dairy farming. Take into consideration that not only do they feel their staff should not work at night—that is bizarre in itself—but also that they should not be working Sundays. That is entire seventh of the year. You may have a thousand cows, and hundreds of calves—and they knock out Sunday? When those staff phoned us, we had no option but to say, ‘You do the right thing; you are a farmer; you know what you should be doing; just carry on.’ In my opinion National Foods is so dysfunctional and so disjointed that the HR department, when they get your time card, and the truck driver getting the thousands of litres of milk, are not going to add up to the guy who told you not to work on Sundays. It is so disjointed.

Senator COLBECK —I think there is a difference between not understanding the costs, which we have discussed, and not understanding what it actually takes to run a dairy farm. There is a very clear distinction.

Miss Carter —Correct. They, even as farmers, cannot do it. They are extraordinarily talented at turning a raw product into a fantastic global product, like the King Island dairy product. It is awesome what they do. But that is not their forte. They do not understand the costs that farmers have. Today, realistically, my parents and I gain nothing from coming here. The only thing we can gain is to help these other farmers out. We get it. We were there 18 months ago.

Senator COLBECK —I think your last comment puts it into one: National Foods just don’t get it.

CHAIR —Could I invite you also to give us evidence over the telephone, perhaps on the twelfth?

Miss Carter —Certainly.

CHAIR —I apologise for cutting you short, but between Swifts, National Foods, a bloke called Stirling Buntine and the Great Southern cattle rogue scheme, King Island has had a bit of a doing.

Miss Carter —They have.

CHAIR —I am afraid that, as we need to get everyone on the plane on time so that we can receive evidence in Canberra in the morning, we regretfully have to leave. But we thank you for your very valuable evidence.

Committee adjourned at 3.57 pm