Identifier
Created
Classification
Origin
09MELBOURNE88
2009-07-29 01:21:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Consulate Melbourne
Cable title:
U.S. DAIRY SUBSIDIES HURTING VICTORIAN FARMERS?
how-toVZCZCXRO8767 RR RUEHPT DE RUEHBN #0088/01 2100121 ZNR UUUUU ZZH R 290121Z JUL 09 FM AMCONSUL MELBOURNE TO RUEHC/SECSTATE WASHDC 4974 INFO RUCLRFA/US DEPT OF AGRICULTURE RUCPDOC/DEPT OF COMMERCE WASHDC RUEATRS/DEPT OF TREASURY WASHDC RUEHBY/AMEMBASSY CANBERRA 3619 RUEHWL/AMEMBASSY WELLINGTON 0003 RUEHDN/AMCONSUL SYDNEY 2112 RUEHPT/AMCONSUL PERTH 1591
UNCLAS SECTION 01 OF 02 MELBOURNE 000088
SENSITIVE
SIPDIS
STATE PLEASE PASS TO USDA/FAS/KIENDL, MANGINO
STATE PLEASE PASS TO USTR
E.O. 12958: N/A
TAGS: EAGR ETRD ECON AS
SUBJECT: U.S. DAIRY SUBSIDIES HURTING VICTORIAN FARMERS?
Summary
-------
UNCLAS SECTION 01 OF 02 MELBOURNE 000088
SENSITIVE
SIPDIS
STATE PLEASE PASS TO USDA/FAS/KIENDL, MANGINO
STATE PLEASE PASS TO USTR
E.O. 12958: N/A
TAGS: EAGR ETRD ECON AS
SUBJECT: U.S. DAIRY SUBSIDIES HURTING VICTORIAN FARMERS?
Summary
--------------
1. (SBU) The Managing Director of Australia's largest dairy producer
claims that U.S. subsidies are driving down Australian dairy prices.
In addition to managing the effects of a 12-year drought, Victorian
dairy farmers are also worried that Australia's proposed emissions
trading scheme will significantly disadvantage dairy production.
End Summary.
Impact of U.S. Subsidies
--------------
2. (SBU) Stephen O'Rourke, Managing Director of Australia's largest
dairy producer, Murray Goulburn, told Consul General on July 22 that
the U.S. Dairy Export Incentive Program (DEIP) has pushed Australian
dairy prices to "unsustainably low levels." O'Rourke went on to say
that these low prices will force the Australian dairy market to
contract. He does not believe that using subsidies to target
certain geographic areas will be effective given the small size of
the global dairy export market; only 6 percent of global milk
production is exported. For example, even if subsidized U.S. milk
is only directed to key European markets, European producers will
eventually shift exports to markets in which Australian producers
compete either directly or indirectly.
3. (SBU) On July 28, embassy FAS Officer met with Dairy Australia
(DA),which is the leading industry group for the country. When
asked what type of analysis had been carried out on the DEIP's
impact on Australia's dairy market, DA representatives indicated
that no substantial research had been conducted. Dairy Australia
went on to say that Murray Goulburn's assessment of DEIP's impact is
therefore anecdotal and should be taken in that context.
Conversations with Dairy Australia were amiable, and DA
representatives indicated that they remain in close contact with
their U.S. counterparts.
Worried about Emissions Trading Scheme
--------------
4. (SBU) Turning to Australia's Carbon Pollution Reduction Scheme
(CPRS),O'Rourke said that it will be an "absolute killer" for the
Australian dairy industry. (Note: Livestock farmers are responsible
for approximately 12 percent of Australia's total greenhouse gas
emissions. End note.) The GOA's position is that agriculture,
including dairy, will be phased into the CPRS starting no earlier
than 2015 after developing ways to measure and assess greenhouse gas
emissions from agriculture. Unlike other carbon intensive
industries in Australia, the dairy industry had not been allocated
specific permits. O'Rourke attributed this to a mediocre
relationship with the federal government. Given that the Murray
Goulburn cooperative alone includes approximately 2,500 farmers and
is increasingly moving to higher value-added products such as
protein powders and infant formula, O'Rourke was puzzled by the
GOA's reluctance to support the dairy industry as a supplement to
Australian commodities exports. He did note, however, that Murray
Goulburn's relations are better with the Victoria state government.
Drought
--------------
5. (SBU) Victoria's ongoing drought has hit the northern part of the
state particularly hard; O'Rourke noted that dairy production is
shifting to Western Victoria as a result. Tough weather has also
led to a consolidation of farms, reducing Murray Goulburn's number
of farmers from 3,400 to 2,500. (Note: Murray Goulburn is
Australia's last remaining farming cooperative and has an annual
turnover of approximately A$2.7/US$2.2 billion. The state of
Victoria produces nearly 65 percent of all Australian dairy. End
note.)
Comment
--------------
6. (SBU) While the initial uproar over the DEIP has faded
significantly from the public sphere, Victorian farmers are now
grappling with significantly lower prices for their products and a
tightening supply due to the impact of an ongoing drought. Murray
Goulburn is confident that it will weather these tough conditions
due to its size and strong cash reserves. Smaller, independent
farmers in Victoria, however, will likely be facing very tough times
MELBOURNE 00000088 002 OF 002
ahead.
THURSTON
SENSITIVE
SIPDIS
STATE PLEASE PASS TO USDA/FAS/KIENDL, MANGINO
STATE PLEASE PASS TO USTR
E.O. 12958: N/A
TAGS: EAGR ETRD ECON AS
SUBJECT: U.S. DAIRY SUBSIDIES HURTING VICTORIAN FARMERS?
Summary
--------------
1. (SBU) The Managing Director of Australia's largest dairy producer
claims that U.S. subsidies are driving down Australian dairy prices.
In addition to managing the effects of a 12-year drought, Victorian
dairy farmers are also worried that Australia's proposed emissions
trading scheme will significantly disadvantage dairy production.
End Summary.
Impact of U.S. Subsidies
--------------
2. (SBU) Stephen O'Rourke, Managing Director of Australia's largest
dairy producer, Murray Goulburn, told Consul General on July 22 that
the U.S. Dairy Export Incentive Program (DEIP) has pushed Australian
dairy prices to "unsustainably low levels." O'Rourke went on to say
that these low prices will force the Australian dairy market to
contract. He does not believe that using subsidies to target
certain geographic areas will be effective given the small size of
the global dairy export market; only 6 percent of global milk
production is exported. For example, even if subsidized U.S. milk
is only directed to key European markets, European producers will
eventually shift exports to markets in which Australian producers
compete either directly or indirectly.
3. (SBU) On July 28, embassy FAS Officer met with Dairy Australia
(DA),which is the leading industry group for the country. When
asked what type of analysis had been carried out on the DEIP's
impact on Australia's dairy market, DA representatives indicated
that no substantial research had been conducted. Dairy Australia
went on to say that Murray Goulburn's assessment of DEIP's impact is
therefore anecdotal and should be taken in that context.
Conversations with Dairy Australia were amiable, and DA
representatives indicated that they remain in close contact with
their U.S. counterparts.
Worried about Emissions Trading Scheme
--------------
4. (SBU) Turning to Australia's Carbon Pollution Reduction Scheme
(CPRS),O'Rourke said that it will be an "absolute killer" for the
Australian dairy industry. (Note: Livestock farmers are responsible
for approximately 12 percent of Australia's total greenhouse gas
emissions. End note.) The GOA's position is that agriculture,
including dairy, will be phased into the CPRS starting no earlier
than 2015 after developing ways to measure and assess greenhouse gas
emissions from agriculture. Unlike other carbon intensive
industries in Australia, the dairy industry had not been allocated
specific permits. O'Rourke attributed this to a mediocre
relationship with the federal government. Given that the Murray
Goulburn cooperative alone includes approximately 2,500 farmers and
is increasingly moving to higher value-added products such as
protein powders and infant formula, O'Rourke was puzzled by the
GOA's reluctance to support the dairy industry as a supplement to
Australian commodities exports. He did note, however, that Murray
Goulburn's relations are better with the Victoria state government.
Drought
--------------
5. (SBU) Victoria's ongoing drought has hit the northern part of the
state particularly hard; O'Rourke noted that dairy production is
shifting to Western Victoria as a result. Tough weather has also
led to a consolidation of farms, reducing Murray Goulburn's number
of farmers from 3,400 to 2,500. (Note: Murray Goulburn is
Australia's last remaining farming cooperative and has an annual
turnover of approximately A$2.7/US$2.2 billion. The state of
Victoria produces nearly 65 percent of all Australian dairy. End
note.)
Comment
--------------
6. (SBU) While the initial uproar over the DEIP has faded
significantly from the public sphere, Victorian farmers are now
grappling with significantly lower prices for their products and a
tightening supply due to the impact of an ongoing drought. Murray
Goulburn is confident that it will weather these tough conditions
due to its size and strong cash reserves. Smaller, independent
farmers in Victoria, however, will likely be facing very tough times
MELBOURNE 00000088 002 OF 002
ahead.
THURSTON