Australian Dairy Crisis Explained

The Entire Crisis in a Nutshell

Murray Goulburn and Fontarra are two of Australia’s largest milk producers an exporters. They buy and resell milk from Australian dairy farmers.

Usually, they pay about $5.60 per kilogram, of which 60c in profit for the farmer. Recently, they decide to only pay farmers below the $5.00 mark, meaning Australian dairy farmers earn nothing, and in fact are losing money with sales of their milk.

Why did this happen?

A number of different factors came together, but the main problem has been an oversupply of milk.

This was a result of Asia consuming less milk than expected, combined with the removal of limits on milk production for countries in the European Union. And oversupply and under demand has given consumers the control, driving prices too low to keep dairy farmers well paid.

Why is it so bad for Australian Farmers?

The biggest injustice, and the most damaging aspect of the problem is that the Murray Goulburn/Fontarra price cuts are retrospective. That means that the price these companies are paying for milk applies to milk that they have already purchased, putting thousands of dairy farmers into debt.

Not only has dairy farming become unsustainable for a lot of Aussie dairy farmers, it’s also put them into debt and potentially pushed them towards ruin.

What is being done to fix the problem?

• Consumers are urging each other to buy more expensive, brand-name milk instead of the home brand products that are causing a lot of the damage.
• The Victorian government has dedicated an $11.4 million support package for dairy farmers. The minister for Agriculture has pledged $550 million. Contributions have been made to the support package by The Gardiner Foundation ($1.4 million) and Dairy Australia ($2.4 million).
• Murray Goulburn has contributed $1 million to the support package. They earned a $40 million dollar profit for the previous year (lower than the $63 million they expected because of the milk crisis).

• The ACCC will launch an investigation into the crisis, which often leads to guilty companies being required to repay victims.
• The managing director of Murray Goulburn, Gary Helou, lost his position, but still earned $2 million in his last 10 months (that double what the company contributed to the support package.)