A year is a long time in dairy. This time last year, we were in the midst of high milk growth, coming off the back of an exceptionally good season.
Confidence was high – certainly amongst processors – leading to investments in assets in dairy regions across Australia.
The drought has had a huge impact on farmers and their families right across Australia. Many farmers have been forced to reduce production to cope with unprecedented high input costs for grain, hay, and water, whilst others are selling up and leaving the industry altogether.
The paradox between one season and the next means that all of us – processors, farmers, and industry alike – need to be agile so that we can better adapt to change and position our industry to thrive in the future.
We’re seeing a new normal emerge in Australian dairy. We need to embrace it, and work together to tackle the changes head-on.
Droughts and floods have always been characteristic of Australia’s fickle climate, but the intensity and frequency of climate events is increasing, and it’s changing the Australian dairy landscape. Declining milk volumes in some parts of Australia mean it’s now more economical to move milk around than to pay a premium where it’s more challenging to produce – it’s why we’re now seeing milk move from Victoria to Queensland.
Unfortunately, this drought won’t be the last – so how do we as an industry better prepare for the next one?
For Fonterra this means getting the basics right, and focussing on the fundamentals. We can’t make it rain, but we can make our business more agile to better weather the challenges, and we can support our farmers to do the same.
Change is constant, and the way dairy is consumed is changing too. Consumers want to know where their food comes from, while alternative sources of ‘milk’ and other forms of protein are also growing in popularity.
As an industry, we need to keep innovating and adapting, to respond to our customers’ and consumers’ needs and make the foods they want. Fonterra is a leader in investing in dairy research and development globally; not just in new products, but also in gaining those consumer insights that help us develop the foods and technologies that our customers and consumers around the world demand.
It’s also about building a resilient business that is well-placed for the future – focussing on developing the right assets, right partnerships, right product mix, and right cost base. It’s about identifying the right markets for our products, and playing to our strengths, by developing strategic partnerships with globally recognised customers where there are mutual benefits. We’ve done this through long-standing relationships with like-minded companies, including Bellamy’s Organic and The a2 Milk Company.
These are the types of things we’re doing today that make our business more resilient that weren’t part of our landscape just a couple of years ago.
The way processors partner with farmers also needs to change – by working together, we can be bolder and braver.
For example, how do we tackle the challenges of water security, growing our industry, and growing the dairy workforce, together? Building better capability in dairy needs to be a focus, by upskilling the next generation we may be able to stem the flow of farmers leaving our industry.
For Fonterra, it’s about equipping our farmers with the tools that make the job of running their businesses a little bit easier.
This time last year we launched Farm Source – a package of tools and services to assist our farmers in running their farm businesses, and we’ve just rolled out Farm Source Professional across our dairy regions – an on-farm service that encourages suppliers to focus on purpose, to set goals for themselves, and work with our experts across HR, finance, agronomics, milk quality, and animal health and wellbeing to realise those goals.
It complements the work that Dairy Australia does through its farm extension programs, as well as services offered by industry professionals. It’s changing the way we work with our farmers, as we look at ways we can help improve farming systems to better navigate the environmental and other challenges ahead.
In Australia, our industry has an enviable global reputation for making quality dairy foods, and together we’ve built on that reputation to drive demand in growing markets.
Despite the challenges we’re facing, the long-term fundamentals for Australian dairy remain strong. By controlling what we can control, we’re positioning ourselves for success and building a strong future for our industry.