Looking for positves, page-583

As an aside this article is really really annoying for a number of reasons...but it certainly highlights why AHF should and could be such a differentiator with its horizontal and vertical integration approach and seeking to distance itself from things like the $1/litre or highly competitive markets even though the AHF model needs some serious fine tuning as we all know.

http://www.abc.net.au/news/2017-03-15/new-lion-dairy-contract-for-wa-milk-producers/8353700

[EXTRACT]
South-west dairy farmer forced out of industry by 'unsustainable' prices signs new six-month deal

WA Country Hour
By Michelle Stanley
9

Posted Wed at 9:02am
PHOTO: The prospect of a low farm gate price forced the Armstrongs to opt out of the industry. (ABC News: Claire Moodie)
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MAP: Northcliffe 6262

A dairy farmer in Western Australia's south-west who was forced out of the industry by "unsustainable" farm gate prices has this week signed a six-month contract with a new supplier.

Frances and Michael Armstrong had been contracted to Brownes Dairy until this month and, after being notified of the termination of their contract, were offered a three-year extension with the company at the lower price of 45 cents per litre.

However, the Armstrongs rejected the offer, saying 45 cents per litre was unfair and unsustainable.

"That was the price Michael's father was getting in 1970, so we really couldn't sustain that," Ms Armstrong said.

The Armstrongs have since signed a six-month contract, which began this week, with competing dairy processor Lion Dairy & Drinks.

Ms Armstrong said the new contract was "brilliant" and a "huge relief".

"It's a very attractive offer, it seems very fair," she said.

"It actually looks like it's going to be better for us than the Brownes contract, so we're really pleased about that."
Plan to switch to beef cattle

Following the letter of termination regarding their previous contract with Brownes, the Armstrongs decided to leave the dairy industry and take on beef cattle, rather than accept the lower price.

Mr Armstrong said the idea of converting from dairy to beef cattle had been discussed within the family for more than a year.

PHOTO: The Armstrongs have considered converting from dairy to beef cattle, but were not ready to leave the dairy industry so soon (ABC Rural: Anthony Pancia)

"The seed was in the back of my mind as to how long I was going to stay in the industry," he said.

"When Brownes sent us a letter in September saying that our contract was terminated, the initial thought was 'What are we going to do?'

"Then I sort of thought 'Oh hang on, maybe that's the push I needed'."

However, the Armstrongs had not been expecting to leave the dairy industry so soon.

"It really would've hit us hard if we didn't have a contract, because we're not ready to go totally into beef yet," Ms Armstrong said.
"If we had to finish, it would've been on March 12 with Brownes. We would've kind of been financially in quite a bit of strife, I think."
The Armstrongs said the new contract would reduce the stress on themselves as well as their dairy cows.
The contract will run until September, which Mr Armstrong said would give them a chance to dry off their cows or find a home for them.
Contract offered to produce additional milk volumes

It is not confirmed whether there are other dairy producers currently out of contract who have been offered a contract with Lion.

However, in a statement, a Lion Dairy & Drinks spokesperson said the company had "recently made the decision to enter into a short-term contract with a new Western Australian dairy farmer to procure the additional milk volumes we need in the state".

Brownes Dairy was also contacted and, in a statement, a spokesperson said negotiations were confidential, but "economic factors will inevitably and unavoidably mean prices will adjust. That is the reality of the market system".

The spokesperson said due to the deregulation of the market in 2001, current contract prices could not be compared to prices pre-2001.

"Following deregulation, the industry became subject to market forces, making it nonsensical to compare current prices to those in the 1970s," the spokesperson said.

"In fact, at the height of the Global Financial Crisis in 2007 and 2008, farm-gate prices were closer to 38 cents per litre.

"The introduction of $1 per litre milk in January 2011 has further altered the competitive landscape."
[END]