Aussie Dairy Farmer Earns $2.46 an Hour

This aerial photo taken on Aug. 7, 2018, shows cattle on a dry paddock in the drought-hit area of Quirindi in New South Wales. A crippling drought is ravaging parts of Australia, decimating herds and putting desperate farmers under intense financial and emotional strain, with little relief in sight. (Glenn Nicholls/AFP/Getty Images)

A dairy farmer from New South Wales took to social media saying he’s being paid $2.46 an hour—a fraction of the country’s minimum wage of $18.93 an hour.

Speaking from his farm in Kyogle, northern NSW, Shane Hickey, 42, expressed his frustration at the earnings he’d received for July in a video first posted Aug. 14 on Facebook.

“As you can tell, it’s really dry at the moment. It’s super, super dry,” he said, referring to the drought that is currently wreaking havoc on farmers all across the state as well as some neighbouring regions.

“I just received my milk cheque for this month. I worked this month for $2.46 an hour,” he said.

“Something’s gotta change. You can’t keep this s[expletive] up,” Hickey said. “People can’t expect farmers to continuously work for nothing. That’s basically slavery.”

“I’m not irrigating at the moment because my irrigator’s broken, and I have to work within a budget, and there’s no money in the budget. So I’ve just got to try and do it myself.”

The video has garnered 3.2 million views on Facebook as of Aug. 20.

“That’s all I got, $2.46 and I’m expected to pay a mortgage and take care of my three kids and try and survive. We’re not.”

Mandatory Dairy Code

The rates at which farmers are being paid for their milk—also known as farmgate prices, which are announced at the beginning of a given season—are being squeezed by the dairy processors—the companies that buy and process the milk that eventually gets exported or sold to local supermarkets.

According to a 12-month inquiry by the Australian Competition and Consumer Commission (ACCC) released in April 2018, there exists a “significant bargaining power imbalance” between farmers and the dairy processors, which can negatively affect farmgate prices.

The report stated that the farmers’ “weak bargaining position leads to contract terms weighted heavily in favour of processors.” The inquiry recommended a mandatory code to oversee the farmer-processor business relationship.

Attempts at a Voluntary Dairy Code (pdf) for the industry were made in response to the ‘dairy crisis’ in 2016, when two major dairy processors significantly cut the farmgate prices retrospectively—after the milk had already left the farm. Murray Goulburn, one of the major companies, blamed unfavourable exchange rates, lower-than-expected adult milk powder sales in China, and a devaluation of its milk supplies for the price cuts, the ABC reported at the time.

The “Voluntary Dairy Code has resulted in some changes, but it is not enforceable and does not offer an adequate long-term solution,” the ACCC said about the 2017 industry response that attempted to outlined what dairy processors could and could not do in relation to their farmer suppliers.

“We found that dairy processors are unlikely to volunteer to be covered by a prescribed voluntary code that is strong enough to address the market failures we identified in the dairy industry,” Mick Keogh, deputy chair of ACCC, told Milk Maid Marian.

Currently, farmers do not have as much access to price and market information as processors, and have little opportunity to negotiate aspects of their contracts with the processors, the ACCC report stated.

As such, risks are being transferred onto farmers via contracts with terms that allow processors to fall back on agreed farmgate prices and limit farmers’ ability to switch between processors. According to the ACCC, this has reduced competition between processors, reducing the incentive for them to raise farmgate prices.

“A mandatory code would reduce market failures resulting from these issues by improving the quality of information and price signals, enabling fairer allocation of risk, and enhancing competition by removing switching barriers [for farmers],” the ACCC report said.

Rising Costs

Farmers continue to face increasing costs as the drought persists, with many forced to buy fodder for their livestock. Hay, grain, and irrigation water costs are all adding to the squeeze farmers face, John Droppert, senior analyst with Dairy Australia, told the ABC in June, adding that such costs “presented significant headwinds for the season ahead, particularly in those parts where dry conditions persist.”

A farmer, Donnie, who has been producing milk for 55 years wrote to radio station 2GB saying that if farmgate prices remain at their current rate, milk production in Australia is unlikely to be sustainable.

“If the milk prices doesn’t improve and the cost of producing milk continues to rise, there will be no fresh quality milk in Australia,” Donnie said in his letter.

“Before deregulation, the price the farmers were paid were 58 cents per litre. After deregulation it went down to 27 cents. It’s now about 40,” the letter continued. “With costs of fertiliser, electricity, and farm expenses, it will not be sustainable for dairy farmers to keep going. Unless the price of milk increases.”

Currently, the industry for Australian dairy is completely deregulated. This means that international prices have a major influence on farmgate prices. “At an average of approximately US 42c per litre, Australian dairy farmers receive a low price by world standards and therefore have to run very efficient production systems,” the Dairy Australia website reads. Third-generation dairy farmer Peter Haertsche based in Augathella in Queensland’s central west also wrote to 2GB saying: “I’m a third generation dairy farmer. I’m angry and frustrated that handouts and subsidies are being touted as possible remedies to the drought.”

“They’re not.

“They’re only enablers. Farmers don’t want charity. They’ve got too much self-esteem.

“Farmers want a fair price for their product, 24/7,” Haertsche wrote in his letter.

“Presently, we’re getting the same price we did 25 years ago. Hay and grain are sitting at $500 a tonne, delivered. Whereas at the start of the year, grain was $200, hay was $150, delivered.

“This has meant a $20,000 increase per month for our 200-cow herd. We have no real choice. No feed, no milk. We could exit the industry. Cheap loans only add to debt, and you need income to repay it,” he added.

Speaking to news.com.au, Hickey says there is a need for processors and supermarkets to work together to ensure farmers are better compensated for their work. “The processors and the supermarkets need to get together, but they don’t,” Hickey told news.com.au. “You talk to supermarkets, and they blame the processors, you ask the processor and they say it’s Coles and Woolies.”

“Everyone else in Australia is guaranteed a fixed award wage, but as farmers we are left to pick up the dregs. We have no protection. We are at the bottom of the barrel.

“We work and work, and once we get our pay cheque, it’s a mystery bag most of the time on what we will get,” Hickey told news.com.au.