The farm lobby, bloodied – but probably unbowed

The Senate Economic References Committee has this week released its findings on the supermarket milk discounting war. The main findings, blessedly, were that cheaper milk really is good for consumer,s and that there was nothing obviously awry with the competitive market that gets milk to them:

Dairy farmers do not appear worse off from the growth in private label milk that has occurred over time. While there may be some short-term uncertainty due to changes in private label milk contractual arrangements between the major supermarkets and the processors, this appears to be a separate issue. The ACCC’s 2008 report concluded that the lower price of private label milk over time has appeared to shift margin away from processors (with benefits for both the major supermarkets and consumers), while not resulting in a reduced farm gate price.

It’s amazing that farmers’ complaints on this issue were ever taken seriously. Indeed, the obvious takeaway from the report is that people in the farming business are all too ready to point to economic and regulatory issues that don’t actually exist.

Were farm groups embarrassed by any of this? Not a bit. They reacted as they so frequently do, posing at the same time as rugged individualists and pitiable victims of capitalist forces beyond their control.

Given the evidence, we would do better to employ a lot more scepticism when farm groups make statements on economic issues.  They played a decent role early in the campaign to remove tariff barriers, but since then have been a source of much lousy policy for a quarter of a century.

Supporters of decent policy for the Murray Darling Basin will be able to cite plenty of examples where farm group have taken unjustified control of policy. But as a public policy disaster, probably nothing in Australia will ever top the farmers’ self-regulated wool price scheme, which so many woolgrowers believed in long after it became perhaps the worst financial disaster ever to hit the country.

If any other group in Australian society had perpetrated such a fiasco, people would still be making jokes about it. Yet I haven’t hear anyone so much as mention the wool price disaster since about 1995.

No-one hesitates to criticise unions or big business for lousy policy ideas – of which, it must be said, they have plenty. But farmers, despite a long history of backing dumb ideas, seem somehow off-limits.

Tell me what I’m missing here.

About David Walker

David Walker runs editorial consultancy Shorewalker DMS (shorewalker.net), editing and advising business and government on reports and other editorial content. David has previously edited Acuity magazine and the award-winning INTHEBLACK business magazine, been chief operating officer of online publisher WorkDay Media, held policy and communications roles at the Committee for Economic Development of Australia and the Business Council of Australia and run the website for online finance start-up eChoice. He has qualifications in law and corporate finance. He has written on economics, business and public policy from Melbourne, Adelaide and the Canberra Press Gallery.
This entry was posted in Uncategorized. Bookmark the permalink.
Subscribe
Notify of
guest
31 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Jimmy-Jive
Jimmy-Jive
10 years ago

What you are missing?

“the worst financial disaster ever to hit the country.”

The stimulus package is the worst disaster ever to hit the country. The NBN may well one day overtake. So you want to get some things into perspective for starters.

Jimmy-Jive
Jimmy-Jive
10 years ago

“Supporters of decent policy for the Murray Darling Basin …”

You have that totally wrong too and so its a rolling thunder of error. I can see here its become tribal between Canberra parasites and Murray-Darling producers.

Jimmy-Jive
Jimmy-Jive
10 years ago

“pitiable victims of capitalist forces beyond their control.”

Thanks to the belligerent ignorance of our economists we suffer under a situation where our currency, on a price parity basis, is often 25% over-valued, as compared to our trading partners.

How are we supposed to survive and improve our act under those conditions?

Huh!

How is that viable?

Its one thing to have a comparative advantage with one firm or the next but if THE ENTIRE PRICE LEVEL is 15-30 per cent out of whack, how can we, as a country, pay our bills in this world?

I don’t know where you ignorant Canberra types are taking us but I suspect its somewhere very deep and dark, nasty, and without ventilation.

Jimmy-Jive
Jimmy-Jive
10 years ago

Right. Good stuff. But lets not be one-eye blind towards these city-based catastrophes. And David Walker. Why are you letting the stimulus off the hook? This is a proven disaster and we have to come clean about it.

Tel
Tel
10 years ago

Here’s Barnaby Joyce in 2009:

Senator JOYCE— In retailing groceries, what brings people in the door? What is your standard-bearer as a price? Is it the price of a litre or two litres of milk or the price of a kilo of bananas? What do you think are big ones? To be honest, I have never actually gone shopping for Cadbury chocolate. I might, if my kids are with me, end up picking up a block—

CHAIR— I bet you buy bananas, though.

Senator JOYCE— Yes, bananas. I will go in for milk, eggs, bananas, spuds, tomatoes, mince and pasta—that sort of stuff.

http://www.barnabyjoyce.com.au/Newsroom/MediaReleases/tabid/74/articleType/ArticleView/articleId/965/categoryId/4/ECONOMIC-REFERENCES-COMMITTEE-GROCERY-CHOICE.aspx

Not many people listened to him, other than voters, and errr, the big supermarket retailers. When the big retailers started thinking about it, they realized it makes sense to keep your milk price lower than the guy next door.

Personally I but this guy:

http://www.mgc.com.au/wp-content/uploads/large-sidebar-images-about-us.jpg

Shelf stable, price stable. Note the perfect milk, but a good compromise.

Does anyone know how to make cheese?

Ken Parish
Admin
Ken Parish(@ken-parish)
10 years ago

Jimmy-Jive=Bird?

JC
JC
10 years ago

yep.

Yobbo
Yobbo
10 years ago

and he’s gone full retard this time

Pedro
Pedro
10 years ago

I reckon good old Peter Walsh had the best sustained criticism of farmer policies I’ve ever seen. The problem with a guy like Joyce is underneath the funny is the same old dumb country party ideas.

murph the surf.
murph the surf.
10 years ago

I have spent the last 4 years learning about the coastal NSW beef industry and more recently beef production in feedlots and in areas where superior production of beef can occur on pasture like the New England area.
Dairy farmers around me don’t ever complain personally as their contracts are all at quite sustainable prices.
However the comment I would like to make is about the support for the idea that agricultural commodities need state regulation not doubt supervised by self elected rural worthies determined that everyone else needs to pay more.
While this concept is publicly promoted by those seeking some sort of leadership role in agricultural affairs my hunch is that this issue is like watching a foreign election – a lot of noise is made to appease the ignorant yobs who may vote for you in some association or other and outsiders will just think you are batty so who cares what they think?
Rural areas often have terrible education expectations and standards relative to most cities and trying to help through extension courses( sponsored educational events put on by the various government departments )attracts few attendees.
The bizarre nonsense I’ve heard passed around as knowledge is actually scary as some of it relates directly to food prodcution but the background is mostly one of unremitting ignorance about almsot everything outside the local community.
Expecting carefully considered economic analysis is just too much.
Unfortunately into this space creep the local sleaze merchants who play up to this ignorance and frequently use their slight educational advantage to exploit simple information availablility and understanding dysmmetries.The stock and station agent for example.
The converse to this is that those in senior positions and when these same people are well educated they are usually all economic rationalists and free market proponents.
I agree that any position advocated by a farm type group should be very carefully considered prior to acceptance as a good idea.

Steve at the pub
10 years ago

Hmmm, not much farmer background in here (lack of diversity on this blog site).
I’m waiting for some urban ingenue to say “Farming is just a business, like any other, & should be treated as such”.

billie
billie
10 years ago

Why were farmer compaints about $1 per litre milk taken seriously?

Could it be that the architects of this retail strategy, Coles, had successfully run the British Dairy industry out of existence when they worked for Tesco. All British milk comes from Holland now.

I have been told that all dairy product sold in Australia spends 6 weeks in Swires Cold Stores in Sydney by the spouse of a fork lift driver. Most ‘fresh’ milk is reconstituted and the $1 per litre milk can have whey added into it. In China melamine was added to New Zealand powdered milk destined for infant formula. I prefer to buy brand name UHT milk rather than house brand or any out of the refrigerated case.

Almost all frozen vegetables come from China, Thailand, South africa as well as New Zealand. Sometimes fresh green beans are product of China.

Even the humble icy-pole or ice-block comes from Thailand and costs $3. a loaf of bread costs between $1 and $4.95. I remember when icy-poles were 2 pence. I can remeber when icy-poles and choo-choo bars were 3 pence, cream buns were 4 pence and meat pies were 6 pence.

Fyodor
10 years ago

The reason they aren’t dismissed out of hand is that the economics profession are so useless they have not come up with a solution to our price level being out of whack with our competition, with the consequence of us not being able to live within our means. The economics profession are so ignorant of economics they don’t seem to see our massive sell-off of assets as a problem. They advocate us becoming a post-bird-droppings version of Nauru. Its utterly incredible but some of these know-nothings don’t think we need a manufacturing industry. Flippancy as to the consequences of our financial imbalance and its resultant price level mis-match means for our farmers is just part of this rolling thunder of ignorance.

Yobbo
Yobbo
10 years ago

Why does it matter where vegetables are grown?

The debate about farming always comes down to this – basic xenophobia.

There is absolutely no difference between a bean grown in China and one grown in Australia. The only difference is who can grow it more cheaply.

Australia has a huge advantage in some areas of production – wheat and wool for example – and is at a massive disadvantage for more laborious produce like fruits and vegetables.

The economic answer would be to concentrate on the areas of our comparative advantage and to import the products for which we are at a disadvantage. But economics rarely comes into arguments about the agriculture industry in Australia. Emotions are heavily at play.

Fyodor
10 years ago

Its not basic xenophobia. Its a fundamental problem of us having a currency and banking system so unsound that we have a 25% disadvantage when it comes our price level and that of our trading partners.

rog
rog
10 years ago

Yobbo is advocating that farmers should structure their business and their lives to the trend of the money market to prove that they, the farmers, are not nationalists.

Yobbo
Yobbo
10 years ago

Not really Rog. I’m just suggesting that they should stick to producing goods that can be sold at a profit, rather than rely on subsidies to make their business viable.

Unfortunately there are many people that believe that we need a local version of every industry. It’s the same nationalist thinking that keeps us subsidising automotive plants and the film industry. Farming is no different.

desipis
10 years ago

There is absolutely no difference between a bean grown in China and one grown in Australia. The only difference is who can grow it more cheaply.

You might think that with something as critical as food, we might engage in a little risk management on the demand side.

hammygar
hammygar
10 years ago

There is absolutely no difference between a bean grown in China and one grown in Australia. The only difference is who can grow it more cheaply.

Except in China the beans are fertilized by human shit (oh poo!), while in Australia they are fertilized by clean cow dung or clean superphosphate.

Yobbo
Yobbo
10 years ago

I understand the argument desipis – and it’s the same argument used to justify the automobile plants and such. Especially when these subsidies were first established, the threat of war again cutting Australia off from our nearby trading partners was real.

But this was in the pre-nuclear age. If another world war broke out in pacific, we would have much bigger issues than the availability of fresh peaches.

The other possibility is some kind of extreme weather event or plant disease making it impossible to import the kind of foods we usually import. But even in that event it’s not like having to go without green beans for 6 months (or however long it took for local suppliers to fill the gap in the market) would kill anybody.

The same thing happened with bananas a year ago, and while it was annoying for people who like bananas, the world didn’t end. I’m not sure it’s worth pursuing a multi-billion per year subsidy scheme to try and circumvent these sort of shortages.

There are plenty of substitutes available for most foods, and the majority of our culture’s caloric intake (wheat, beef, poultry) is produced locally and already internationally competitive, so wouldn’t be affected at all.

rog
rog
10 years ago

Re bananas, you neglect to mention the govt aid given to banana farmers after recent cyclones – for them the world did not end.

The fact is that whilst capital can shift globally overnight most people can’t.

Yobbo
Yobbo
10 years ago

People don’t need to, unless you think something like Banana farming is something ingrained into your DNA at birth.

murph the surf.
murph the surf.
10 years ago

http://forestry.msu.edu/china/new%20folder/jo_fertilizer.pdf
The link is a slightly dated study of fertiser use in China.The use of organic fertilser is declining and non organics form the basis of Chian attaining greater food security but developing problems related to overuse or excessive applications of the same.
The previous link about the dairy industry in the UK showed it was still a very substantial business.
And can the moderator do anything about the fake Fyodor?

FDB
FDB
10 years ago

Jesus, Bird.

Fyodor might not appreciate this. You’d best have the Campari chilled by the time he rolls up or he’ll tear you a new pyramid.

john
john
10 years ago

Suggest it might have more to do with marginal seats , and city/rural fringe voters and with retiree votes that have moved to regional areas than it has to do with actual farmers.

trackback

[…] acknowledged over and over, a lot of country people don’t believe the numbers. Spurred on by the normal low-quality rural policy debate, they talk about a vast Chinese buy-up. As Laurie himself noted, if everything he’d heard was […]

trackback

[…] policy in Australia that gets weaker treatment than agriculture these days? Whether it’s milk prices or agricultural investment, the normal Australian tough-mindedness about policy gets shunted aside […]