Along with the water in our dams and rivers, Australia’s milk pool is dwindling, leaving processors like Bega Cheese in the position of having to pay more in an increasingly competitive market.
“The price for milk fluctuates throughout the year,” explains fifth-generation Bega dairy farmer Rob Russell “so we usually get paid more over winter when it’s considered harder to produce milk.”
“As I understand it, the recent increase will mean we are paid an extra 5 cents per kilo over December and January.”
In his speech at the recent Bega Cheese annual general meeting, board chair Max Roberts opened by acknowledging that the company has delivered “a solid result in what has been a challenging year for the dairy industry.”
Mr Roberts says that the supply and competition issues anticipated by the company have become worse sooner than expected.
“We have previously been advised that conditions impacting 2019 would continue into 2020 and this has proven to be the case, but at a faster and deeper rate,” he says.
“The ongoing drought has resulted in a significant reduction in Australia’s milk pool and higher costs across our business.”
The bottom line for the company is that earnings are expected to fall to between $95 million and $105 million for 2019-20, compared to $115 million in the last fiscal year.
Rob Russell sees the company “stuck between a rock and a hard place.”
“They have to make their bottom line work, just like we do. We want Bega Cheese to be a strong company.”
Rob is not concerned for his own family but is deeply concerned about the next generation of farmers, who don’t have the assets and dividends to help them through dry times.
“We’re not making any money but at the moment, we can withstand what the environment is throwing at us,” he says.
While this week’s rain has left him feeling positive, Rob’s voice goes quiet when he speaks about the future of farming.
“The industry can’t afford to lose young farmers but that’s what happening. It’s terrible. A small price rise doesn’t do much for dryland farmers.”
While dairy farmers don’t have much room for diversifying, Bega Cheese has made diversifying a priority since it first floated on the stock market in 2011.
“In my 36 years with the company, I’ve seen Bega Cheese transition into The Great Australian Food Company,” Mr Roberts says in his AGM speech.
The company has introduced 41 new products or product variations and three new brands this year – Simply Nuts, Farmer’s Table and Modern Chef, and continues to broaden its reach in nutritional products and infant formula, including goats milk and organic varieties.
Export products now make up 31% of the companies revenue.
But all these food products rely on farmers to produce a raw product, which in turn relies on stable environmental conditions.
Rob says he is “really frustrated” about the lack of government action about climate change.
“I’m a believer in global warming, our whole system of living is mucked up and it’s frustrating because five years ago, ten years ago, we could have done something so we’d be in a better position now.”