It is an honour to follow the member for Forrest from Western Australia, who we heard is possibly the only dairy farmer in the parliament. She brings to this place enormous insight into the industry. I have had the privilege of going to Western Australia and visiting the member's office. Not only is she an asset to this place but, because of the advocacy she does in the industry, she is well respected by her peers.
I rise to speak on the Primary Industries (Excise) Levies Amendment (Dairy Produce) Bill 2014. In summary it is a request by the industry to take the cap off a levy to increase it. I will speak on that later at length. I believe the bill as it sits in the House at the moment has support from both sides of the House. Before I go on to speak at length about the bill and the intricacies of it it would be remiss of me not to highlight the plight of Queensland dairy farmers, particularly in the south-east corner.
My electorate of Wright takes in just on 8,000 square kilometres. We have seen our fair share of dairy farmers exit the industry over the last couple of years. It is a travesty. Are they leaving the industry because of market conditions or are they leaving it through natural attrition? The latest numbers highlight that Queensland used to have in excess of 2,500 dairy farms and today we have fewer than 500. The dominance of the retail market is having a negative effect on our producers. Since the introduction of $1 a litre milk we have seen an additional 100 dairy farmers exit the industry and the largest producer in our area and in Queensland seeking expressions of interest to buy his farm because he is no longer viable.
I commend the work of the Queensland Dairyfarmers' Organisation and in particular its President, Brian Tessmann, for the terrier-like approach he has taken in taking the charge up to the retailers for the way they are bastardising this sector. I also acknowledge the outstanding work done by his Vice-President, Ross McInnes. Ross is probably a third generation farmer in my electorate and a true gentleman. He gives his time more than freely to help fight for the cause and to give me the tools to go into battle for their sector. Adrian Peake, the Executive Officer of the Queensland Dairyfarmers' Organisation, has also been a wealth of knowledge.
To give you an idea of the stress that these guys are under I will quote from a media release and some recent surveys that the Queensland Dairyfarmers' Organisation did under the auspices of the gentlemen I have just alluded to. Recently the Queensland Dairyfarmers' Organisation conducted a survey of the extent of the Queensland crisis. They sent the survey to no fewer than 496 dairy farmers and they received a response rate of 46 per cent. The data that came out of that was shocking and chilling. Almost nine out of every 10 Queensland dairy farmers lack confidence in the future of their industry. If that lack of confidence to continue to make long-term investments were translated to any other industry, it would make front-page headlines.
The majority have a negative cash flow. It is estimated by the QDO that the farm gate milk price will need to rise by no less than 12c per litre before confidence can be renewed and fresh milk supplies restored for the Queensland consumer. That was one of the key findings of that survey. QDO President, Brian Tessmann, said that the survey was confirmation of the ongoing impacts and confidence crisis hitting Queensland's industry, which has been rocked in recent years by floods, cyclones, the milk price war and now severe drought. Of those surveyed, an alarming 87 per cent said that they were uncertain or not confident in the future of the northern industry and 79 per cent were either uncertain or not confident in their own dairying business.
When you go beyond that survey to try to understand why these guys are not confident about the future, you need not look any further than their cost of production and what they get paid. The Queensland government's Queensland Dairy Accounting Scheme report for the 2012-13 financial year reports that the cash cost of production in our area is 55.2c per litre, compared with the farm milk gate price of 51.3c a litre, leaving dairy farmers in the red. It is implausible that we would have an industry whose weekly milk cheque is unable to meet their weekly operations. When the money comes in there is not enough to pay the outgoings on a weekly basis, so farmers are drawing down on the equity of the assets on their property to maintain viability.
There is desperation among dairy farmers. I will use the example of some excellent dairy farmers in my electorate: Alan and Dolores Stock from the Lockyer Valley. It is painful to witness the uncertainty on these people's faces when they ask you, 'As a government, what can you do to help us?'
They do not ask or advocate for a handout; that is not what they ask. They just ask why it is that they cannot go ahead when they see world prices for milk exports at record highs. Why is it that we see processor bidding wars into the tens of millions of dollars—hundreds of millions of dollars—to buy profitable processing plants, and are these profits of retailers and processors coming at the expense of our farm gate?
The economic purists will say that it is rationalisation of the market. I challenge that theory with the fact that it is not a free market. The principles of demand and supply would mean that, with less supply, there would be more demand and so the price would go up. That process is capped because of the $1 a litre milk. It becomes a regulated market as such, a regulated market where the true effects of demand and supply are unable to roll out in their entirety. So it is of great concern for the likes of Alan and Dolores Stock, and I do not know if they are prepared to go on, with the pain they are feeling—unless, as a government and as a parliament, we can bring some pressure to bear to change their confidence levels or, at a minimum, help them with the result that their milk cheque is going to be greater than their outgoings. Their outgoings have virtually doubled over the past couple of years as a result of the drought, cyclones and other weather effects.
If I had a magic wand, I would order 100 millimetres of rain for every dairy farmer, for every primary producer, on the days that they wanted it. If I had a magic wand, I would do that. If I had a magic wand, I would influence downward pressure on their input costs—electricity costs, protein costs, transport costs. If I had a magic wand, I would do that, but I do not. I have limited tools available to me in this place to influence change, and what the industry says would make an enormous difference is a mandatory code of conduct for the retailers to adhere to, for there to be an independent adjudicator. It is unfathomable that, as a society, we are prepared to sit and watch this industry falter—particularly in Queensland where operational costs, I grant, are higher than the state averages. Milk is such a staple: milk is a food; milk is a protein source. We pay more for bottled water than we do for milk; we pay more for Coca-Cola than we do for bottled milk. And yet when you have a look at the health benefits of milk, it is not a product that we can allow to exit our shop aisles.
I have grave concerns that the square metreage of aisles with UHT milk is becoming greater and greater. I do not know if it is an underlying motivation of the retailers to actually exit the fresh milk sector because of the operational cost to keep it there—the freezer cost. The retailers had the carbon tax increase the cost of their refrigerant gas, so their operational costs for milk are so much higher. The labour cost on fresh milk is so much higher because of the rotational cost. But once they put a carton of UHT milk up on the shelf, it can sit there for a number of weeks without the cost of refrigeration—
Mr Nikolic interjecting—
Mr BUCHHOLZ: or for months, yes—or stock rotation. The retailers know quite well the value of milk. They know the value of milk because they strategically place it at the back of their shops so that you have to walk past their other product lines to pick up your staples—your milk and your bread—before you turn back through the shop. They refer to it as using it as a basket filler.
Before my time expires, I also want to bring to the attention of the processors that they have a responsibility. There are many profitable parts of their businesses: in yoghurts, in cheeses, in the by-products that are built from cream. We also use as a staple healthy products that are profitable. The message I send to the processors is this: do not think that the weakest link in this value chain can continue to be the dairy farmer. I call on the premium groups that negotiate with the processors to understand the value of the product. If a processor does not have milk for one week, can you imagine what the retailers' business model would look like? If people are going to shops to buy milk and bread and retailers do not have milk—well, I do not know, but there is a value component in your negotiations.
Do not continue, dairy farmers of Queensland, to accept prices on behalf of farmers that are less than the price of the cost of production. You must rally. I will do everything in my power, through this place with my colleagues and with this House, to bring about the changes that you need legislatively to compete on an equal playing field. I give you that commitment; I will continue to fight. I had discussions yesterday with our small business minister, of which I will report back to QDO this afternoon. But there is not one silver bullet that is going to fix this industry. It is a battle that has to be fought on many fronts. The retailers must allow a fair price for a great product in their outlets. Our processors must become far more reasonable in the way that they negotiate with our dairy farmers.
In Queensland, we have a situation where the number of dairy farmers that have exited our market means we can no longer produce the volumes required for domestic consumption. We are importing milk from New South Wales. It is at a higher rate than the farm gate by the time you put the transport costs on it and it begs the question: how this is sustainable?
My dairy farmers are at a point of desperation, the industry is at a point of desperation; they no longer want lengthy Senate inquiries. They no longer want submissions to be—
Ms McGowan: They want action!
Mr BUCHHOLZ: They want action, and they want it so that they can continue to survive. At the moment, their enterprise—their world—is frightfully bleak, unless we in this place stand and rally. It is an industry that employs more than 43,000 people in this nation. It is not an industry that we can afford to see disappear overnight. I give them my word: I will continue to fight for their cause.