Dairy shakeout threat to cockies

By GREG ANSLEY

CANBERRA - The Australian dairy industry is rolling towards a shakeout likely to force thousands of farmers from the land.

Pushed both by a sense of inevitability and a vote for deregulation in the dairying state of Victoria, federal and state Agriculture Ministers met yesterday to begin mapping out a process to turn the industry over to the market from July 1 next year.

Canberra has already proposed a $A1.8 billion adjustment package - funded by an 11c a litre retail levy - to ease the industry's painful path into deregulation.

The inevitability has also been recognised by the Senate rural, regional affairs and transport committee, which recommended a national framework for deregulation despite deep reservations and warnings of severe impacts on rural communities.

Analysts also predict that as states open their markets, the number of big players will contract rapidly through mergers and acquisitions of the kind being proposed in Italian titan Parmalat's pursuit of the New South Wales Dairy Farmers cooperative.

The opening of Australian dairying was virtually sealed by the 89 per cent vote of 8000 Victorian producers to accept Canberra's adjustment offer and end the regulation of farm-gate controls on milk supply and price.

Under existing controls, fresh milk is sold for about 50c a litre to processors, and manufacturing milk for 25c a litre.

The Victorian vote is the key to deregulation, because the state produces two-thirds of Australia's milk and 85 per cent of the nation's $A2 billion-a-year dairy product exports.

New South Wales and Queensland will face huge pressure to follow suit.

Victoria claims its cost base is almost one-third below the other two states - increasing its appeal as a manufacturing centre - and supermarkets would almost certainly force New South Wales and Queensland to push down farm-gate prices.

Although the federal adjustment package would initially add 11c a litre to fresh milk, the farm-gate cost of milk in a deregulated Victorian industry would fall by an estimated 20 per cent.

The Victorian Government has yet to agree to deregulation and says the farmers' vote is only one element. The decision will also have a potential impact on regional communities, employment and manufacturing, as well as broader national implications.

The national issues were central to the talks convened yesterday by Federal Agriculture Minister Warren Truss, who has predicted that deregulation could force up to one-third of Australia's 13,000 dairy farmers from the land.

The Senate inquiry has already listed the issues, including abrupt loss of farm income, a fall in the value of capital assets, a loss of quota entitlement in some states, and the loss of farmers' bargaining power with processors and retailers.

But the Senate committee concluded: "At some point the market will force deregulation, and a managed outcome is preferable to deregulation cold turkey."