Why Norco is safe from the global milk crisis
Amid the national milk price crisis, our 120-year-old dairy cooperative Norco revealed it is paying on average the highest farmgate in the country.
The National spotlight shone on the plight of Victorian dairy farmers on Tuesday night, with influential TV personality Waleed Aly, inciting a national 'call to arms' to support our 'flogged farmers'.
Over the past month, Waleed said farmgate milk prices have been drastically slashed, meaning many local milk farmers are staring down bankruptcy. The changes mean that milk farmers are now paid 37 cents for each litre which costs them 38 cents to make.
He explained how a price cut earlier this year by two of the industry's biggest milk buyers, Devondale Murray Goulburn (MG) and Fonterra, dropped the price of milk from a manageable $5.60 per kg of milk solids to between $5 and $4.75. The dairy giants blamed a slump in global prices.
However, Northern Rivers dairy cooperative, Norco, has been sheltered from shareholder volatility, according to its CEO Brett Kelly.
He explained, "We're on target for our budgeted profit. Our sales are collectively all up. Our volumes are up in last year," he said.
"Norco is the last true farmer-owned dairy cooperative and our objective is that you need to make enough profit for reinvestment into the plants.
"Outside of that, it's really important that we can pay the best milk prices so our farmers can reinvest."
"We're predominantly a domestic business. We do get affected to a certain degree from commodity prices but nowhere near as much as the major processors," he said.
Mr Kelly would not disclose farmgate prices due to confidentiality agreements as well as its commercially sensitive nature, however Mr Kelly said Norco's farmgate was 'well above everyone else's'.
Mr Kelly also chalked up Norco's success to its cautious approach to large contracts.
"We have very solid contracts, such as our Coles contract. Being a cooperative, normally the other processors have external shareholders, so what happens when you have external shareholders is that they are quite rightfully are looking at their returns.
So while Aly Waleed's call to arms is gaining traction, the message has already resonated with local consumers.
"These days you have to have a competitive edge. What we have done successfully is that we are the 120 year-old farmer-owned cooperative and that resonates with the public. The consumer here has a high regard for farmers and they want to see them be sustainable.
"So we don't go into any environment competing on price. We go in there with a premium product based on our story and our quality." he said.
Coles Dairy Fund welcomed
NSW Farmers Association yesterday cautiously welcomed the announcement by Coles to create an independent fund to support Murray Goulburn dairy suppliers who have suffered through the company's step down.
NSW Farmers has been engaging with Coles' Executive team on this issue and looks forward to future consultation.
"We welcome any leadership at the retail level that supports our southern dairy farmers during this difficult time," said Chair of NSW Farmers Dairy Committee Rob McIntosh.
"While this fund may go some way towards addressing the current crisis of price cuts and claw backs threatening the livelihoods of farmers; it is important to note that this is only one part of a wider conversation regarding the sustainability of the industry. Farmers need long term investment in proprietary brands as uptake of these products will enable processors to reinvest margins into research and development for new and existing products which will drive stronger farm gate returns," he said.
"Not all consumers want to pay more for proprietary brands, but those who do have the thanks of farmers.
"As has been pointed out in this debate, milk is currently cheaper than bottled water and no one would give that a pass mark through the pub test.
"Any price improvement in fresh milk is welcome and I hope that other retailers consider their position.
"More broadly, I would hope this current focus on milk prices provides a fresh opportunity for the ACCC's Agricultural Engagement Unit to take a fresh look at a long standing problem," said Mr McIntosh.