C H A I R M A N ' S R E P O R T
The weather dominated Australian dairy performance throughout 2006/07with floods, cyclones and drought all testing the dairy industry. But the undoubted resilience of dairy farmers has come at a cost. Farm debt increased as farmers out-performed early milk production predictions to deliver 9.57 billion litres for the year - five per cent less than the previous year and a remarkable result given the extremes of weather conditions. Encouragingly, there were signs of significant opportunity as dairy prices in international markets rose sharply during the year and will likely remain strong providing a sound base for the this coming year. The strong international prices and the demand for milk have placed significant upward pressure on the domestic market. The past year was also one of genuine maturity for Dairy Australia as a service organisation both in terms of its response to changing industry needs and in its execution of the roles expected of it by industry. Dairy Australia is still evolving as a service organisation and is by no means complacent, but I genuinely believe that the Company matured also in the eyes of the people it principally serves – the Australian dairy farmers. A levy on milk has existed in Australia in various guises for close to 100 years. In March 2007, Australian dairy farmers had the opportunity, for the first time, to decide on the levy rate. As part of the polling process, they were able to consult directly with Dairy Australia about the full extent of levy funding. Farmers were able to make a direct connection with their levy and its returns, not just on-farm, but from investments further upstream in the dairy supply chain. This connection also extended to the Dairy Australia Board whose members participated in almost all of the consultation meetings prior to the vote. The Board values and has benefited from the opportunity to be visible to farmers and it will seek to communicate the Company’s full worth to the dairy industry over the coming year. Dairy Australia’s maturity can also be seen in the breadth and depth of its staff’s skills in meeting real industry needs. The Company’s people play a key role in a myriad of industry initiatives: from protecting trade access and influencing biosecurity policies, to stimulating R&D needs on-farm and in manufacturing, to providing information that farmers need to make critical business decisions. The Company has matured in the way it invests levy funds, applying renewed discipline and benchmarks to investment performance and creating a new culture of collaboration and accountability among researchers who benefit from Dairy Australia’s partnership and seed funding. Dairy Australia has met with a good response from the research community as it shifted its strategy to funding fewer but larger research projects. This strategy is helping to generate a critical mass of research activity and talented researchers who are attracted by the continued investment in dairy R&D and the career opportunities. This past year saw the launch of a new innovation centre, Dairy Innovation Australia, with $15 million of ongoing funding over the next three years. Dairy Australia instigated the rationalisation of five dairy manufacturing research centres into one physical entity led by one Board and organisational structure. The staff of each centre must be congratulated for the speed, professionalism and efficiency of the merger. Another example of the Company’s growing maturity is its alignment with the RDPs. The RDPs are critical to the dairy industry in taking onto farms the research carried out by Dairy Australia and its partners. The people within the RDPs have a good feel for local needs and are the natural conduit between the service provider and the farmers. Dairy Australia will seek to enhance the work of the RDPs in the future. Dairy Australia’s ability to respond rapidly to industry needs was tested during the most recent drought but the response again demonstrated the value of collective action. The Company used levy funds to help co-ordinate the industry’s response, pulling together resources and co-ordinating the additional and significant support given by the dairy companies, the Department of Agriculture, Fisheries and Forestry, state Departments of Primary Industries and the RDPs. With a member-elected, skills-based Board, an experienced management team and a wealth of industry partners, Dairy Australia is a service body that has strong connections and commitment to industry and a growing recognition of its value to individual dairy farmers. It is by no means perfect and it does have a major role in communicating the value and benefits of levy-funded investments to dairy farmers. The Board recognises that the levy paid by farmers is a significant amount of money relative to total farm income. It is Dairy Australia’s role to ensure the levy is regarded by dairy farmers not as a cost but as a genuine investment in collective action for the industry and in their own future well-being. In communicating the benefits of investment in dairy research, the Company also needs to identify and communicate the spin-off benefits to the wider community. Dairy Australia’s investments are closely aligned to the Australian Government’s National Research Priorities and the new Rural Research and Development Priorities. The much-hoped-for swift recovery from the drought will demonstrate the benefits to the wider community of a vibrant and growing dairy industry. THE CURRENT YEAR According to the Dairy 2007: Situation & Outlook Report, the outlook for the Australian dairy industry is finely balanced. World dairy demand remains positive with both local and international markets showing great strength and world prices reaching record levels. But the outlook at the farm level is much less certain as farmers face tough decisions about their future due to the effects of the drought, uncertainty about future water access and rising feed costs.