A dairyland company is facing its first legal crisis of the century, as it struggles to survive on a government subsidy, and is struggling to survive in a hostile market.
As the dairy industry’s fortunes and business fortunes take off in Australia, and the government’s policies to support the industry become more and more restrictive, some of the country’s largest dairy producers are now wondering whether it is time for a rethink of their position in the sector.
It is an industry that was once the envy of many other parts of the world, thanks to its superior quality, low prices and low risk of litigation.
But in recent years, the dairy sector has been increasingly exposed to legal challenges, with a number of major Australian producers having filed suit to stop government subsidies for their products.
For now, it is the dairy industries biggest legal challenge, and as such, there is plenty of money on the line.
But this could change in the next few months, with dairy producers hoping that the Federal Court will rule that the Government’s policies are too restrictive and could lead to a drop in dairy products and a reduction in their profitability.
“It could have major ramifications for dairy farmers and other dairy producers in the country,” said Steve Dickson, a senior lecturer in agriculture at the University of Queensland.
While there is no specific number of cases, he said it is likely to be a significant number of lawsuits.
“[Dairyland insurance] is not a huge business for a company, but it is an area that is very important to the industry,” he said.
“If dairy producers can’t get their insurance and if the insurance is not effective, it could have a huge impact on the sector.”
In a recent report by the Australian Chamber of Commerce and Industry, dairy industry groups said that while the Australian Dairy Board has been the “largest provider of insurance” in Australia for years, in recent months it has been facing challenges in its ability to protect its clients.
“The Australian Dairy Insurance Agency is a very small body with just seven members who are appointed by the Government,” said John Wessels, chief executive officer of the Australian Dairies Association.
“In addition to the concerns we have about their ability to make good decisions about their policies, the Government has also said that they will be reducing the number of members that they have in the agency.”
Dairy industry groups say the number one priority for the dairy companies is the health of their cows, but this has come under pressure from a number the Government is reducing in the near future.
The Government is considering reducing the insurance to just one member, which would allow dairy companies to reduce their liability to the Government.
Mr Wessel’s group believes the Government should not be doing this and has called for the Government to reverse its decision.
“I think we need to have a public debate, we need a discussion about what this policy means for the sector and the dairy business,” he told ABC Radio National.
Dairy companies are also worried about the impact on their business models and profitability, with some companies not even considering making a profit.
“Dairy farmers, when they are paying a premium, and they are getting a premium subsidy, they don’t want to see their business model not go into a profit,” Mr Wessel said.
He said that the industry is now seeing dairy farmers being paid more for less milk, which could be damaging to their business.
“What happens to their prices and how much profit are they making from that?
If they are not making a good profit, then the business model is not sustainable,” he added.
The dairy industry has been hit hard in recent times, with the price of milk dropping from $20 per tonne in 2016 to less than $5 per tonnalne in 2017.
Despite the downturn in the dairy market, dairy products are still being sold for a very high price, with milk producers seeing their profits increase significantly, as they can no longer rely on the cheaper milk.
But the dairy products industry is not alone in facing financial difficulties.
More than 60 per cent of Australia’s farmers are facing the prospect of losing their jobs.
“It’s a real challenge,” said Mr Dickson.
“There are a number dairy farmers who are looking at whether they should sell, and those are the people that are going to lose their jobs if they don´t do that.”
That’s the most worrying aspect of it for the industry.
“A number of dairy farmers are also planning to sell their businesses, leaving their families with no choice but to go on the unemployment benefit.
The Federal Government is also considering a number changes to the way dairy farms are managed in the coming months.
It has previously said that dairy farms should be managed in a way that maximises their productivity, but the Government said it would now focus on the needs of dairy farms that are in need of the most.