Dairying in Australia with Devondale - Murray Goulburn the supply chain. A rich mix of dairy...

Dairying in Australia with Devondale

1Dairying in Australia with Devondale

Devondale has developed this booklet to help prospective farmers, dairy workers and investors understand the potential offered by Devondale and the Australian dairy industry. You should take your own independent advice before making any decisions as to whether you enter the Australian dairy industry.

About this booklet

Devondale (Murray Goulburn Co-operative Co. Ltd) is Australia’s largest dairy company and is a co-operative of Australian dairy farmers. Accordingly, Devondale holds a unique leadership position in the Australian dairy industry across the supply chain. A rich mix of dairy ingredients, consumer products, food service and farm trading stores provides Devondale

with a balanced portfolio of products that we can proudly sell to Australia and the world.

In 2011-12, Devondale’s dairy farmer-shareholders supplied 2.94 billion litres of milk, which is approximately a third of the milk produced in Australia annually. Sales revenue was $2.4 billion and 304,000 tonnes of product was exported, primarily to Asia, the Middle East/Africa and the Americas.

Who is Devondale?

Message from the Chairman 2

The Australian dairy industry 3

Devondale at a glance 5

Devondale products and businesses 7

Benefits of supplying Devondale 8

Milk payment system at a glance 9

Devondale in the regions 11

Northern Victoria and southern New South Wales 12 Gippsland 14 South-west Victoria 16 South Australia 18

Contact us 20

Contents

2 3Dairying in Australia with Devondale

The dairy industry in Australia offers a wide range of opportunities for investment and employment. The world demand for dairy products and the diversity of farming systems in Australia provides the opportunity to develop flexible and sustainable dairy enterprises.

Message from the Chairman

The Australian dairy industry

This booklet is designed to assist you in assessing your future dairy business potential in Australia.

It will give you a range of ideas, illustrate the opportunities presented by our dairy industry, indicate issues to be considered, and reinforce the importance and value of a co-operative in the dairy industry.

While we will endeavour to give you as much information as possible, we recommend that you also contact local service providers within the Australian dairy industry to gain as much knowledge as possible on your potential new home.

Our field service team is a valuable resource with expertise in farm development and management and would be happy to assist you with your endeavours.

DairyingDairying is the lifeblood of many Australian regional communities and the nation’s third largest rural industry, behind beef and wheat.

DairyingAustralians enjoy dairy products, consuming a substantial 106 litres of milk and 13 kilograms of cheese per person each year.

AustraliaAustralia is a significant dairy exporter, accounting for about 7 per cent of world trade. Around 38 per cent ($2.76 billion) of Australian milk is exported.

EmploymentIt is estimated that there are about 50,000 people directly employed on farms and in dairy manufacturing. On top of that, there are many people employed in associated industries, such as research and development and dairy transport.

Dairy FarmsThere are 6770 dairy farms in Australia with 1.63 million cows producing 9.5 billion litres of milk annually, or an average 5926 litres per cow.

ValueThe dairy industry has a farm-gate value of production close to $4 billion annually. The Australian Bureau of Agricultural and Resource Economics and Sciences estimates that the value to the Australian economy is actually 2.5 times this amount.

Devondale is Australia’s largest dairy company and is owned by its 2480 dairy farmer-suppliers.

We welcome you to visit us in Australia at any time and look forward to discussing your prospects in more detail.

Kind regards

Philip Tracy Chairman, Devondale

Source: Dairy Australia


Devondale (Murray Goulburn Co-operative Co. Ltd) is Australia’s largest dairy company and is a Co-operative of Australian dairy farmers. Accordingly, Devondale holds a unique leadership position in the Australian dairy industry across the supply chain. A rich mix of dairy ingredients, consumer products, food service and farm trading stores provides Devondale with a balanced portfolio of products that we can proudly sell to Australia and the world.

Each of our dairy farmer-suppliers owns a part of our business, so their interests are paramount as we strive to maintain leadership in the dairy sector.

In 2011-12, Devondale’s 2497 dairy farmer-shareholders supplied 2.94 billion litres of milk, which is approximately a third of the milk produced in Australia annually. Sales revenue was $2.4 billion and 304,000 tonnes of product was exported, primarily to Asia, Middle East/Africa and the Americas.

Figure 2: Australian dairy regions. Source: Dairy Australia

All states have dairy industries, but the bulk of milk production occurs in south eastern Australia.

Western Australia

Northern Territory

Queensland

New South Wales

South Australia

Tasmania

Victoria

Dairy Farming AreasThe national services body for dairy, Dairy Australia, operates Regional Development Programs across the major dairying regions. The programs are as follows:

Dairy NSW DairySA DairyTAS GippsDairy Murray Dairy Subtropical Dairy WestVic Dairy Western Dairy

The Australian dairy industry Devondale at a glance

Figure 1: Australian dairy production. Source: Dairy Australia

Milk utilisation

Cheese 34%SMP/butter 28%Drinking milk 25%WMP 11%Casein/butter 1%Other 1%

Production of main commodities (tonnes)

Milk powders 371,000Cheese 340,000Butter (CBE) 120,000

Value of dairy exports

$2.76 billion7% of world dairy trade

Major markets for Australian dairy products (tonnes)

Australia 2,825,700 (including 2,385,000 of drinking milk)Japan 115,000China 109,000Singapore 90,000Indonesia 48,000Malaysia 47,000

Devondale has established an exciting change agenda to return Devondale and the Australian dairy industry to growth, laying the foundations for a future built on profitable growth, operating excellence and innovation.

2011-12 Financial Year ResultsFarm-gate milk price$5.44 per kg milk solids (41 cents/litre)

Export destinationsAll major markets particularly Asia, the Middle East and North Africa and the Americas.

Employees2100 employees across south east Australia

Equity$759 million

Percentage of Australian milk volumeApproximately 31%Note: Australian milk volume was approximately 9.5 billion litres in 2011-12.*

Production volume740 thousand tonnes of dairy product

Domestic revenue$1.2 billion

Export revenue$1.2 billion

Containers exportedIn 2011-12, we exported the equivalent of more than 21,000 20-foot containers†, making us one of the largest container exporters from the Port of Melbourne and the largest dairy exporter from Australia. † 20 Foot Equivalent Units

* Source: Dairy Australia


Devondale productsand businesses

Head offi ce Freshwater Place, Level 15, 2 Southbank Boulevard, Southbank Victoria 3006 Phone: +61 3 9040 5000

Distribution centres Laverton:Integrated Logistics Centre (130,000 tonne capacity)

Port of Melbourne:Global Distribution Centre(50,000 tonne capacity)

Products: milk powders (full cream and skim), a range of cheese products, specialty ingredients, whey powders, lactose, anhydrous milk fats (AMF), cream, caseins and caseinates, whey and milk protein concentrates.

Products: UHT milk, daily pasteurised milk, butt ers, dairy spreads, cheese, lactose fr ee dairy products, table cream.

Brands: Devondale, LIDDELLS, Cobram Premium Cheese Range, Kiewa Country

Products: whey protein isolates, lactoferrin, natural milk minerals, sports proteins, meal replacer / supplements,infant nutrition.

Brands: Natra, Ascend, Proform

Twenty-one stores and four fertiliser depots servicing rural communities with a range of products and services including hardware; farm needs and equipment; animal health; fodder; dairy hygiene; seed; fertiliser; farm chemicals; work and safety wear; milking machine sales and servicing; technical, and agronomy advice.

Other subsidiaries and joint ventures:

•MG China (wholly owned)•Danone/Murray Goulburn (yoghurt and some other

fr esh dairy) •INTERMIX Australia (blended products) •Australian Milk Products (dairy products to Central America) •Dairy Technical Services (food and milk testing services) •ProviCo (calf milk replacer) •Tasmanian Dairy Products (milk processing in

north-west Tasmania)

Port of Melbourne:Global Frozen Distribution Centre (18,000 tonne capacity)

VictoriaRochester:Cheese, milk powders

Cobram:Cheese, milk powders,infant formula

Kiewa:Daily pasteurised milk, yoghurt, cream cheese, cream

Maffr a:Milk powders, blends, butt er

Leongatha:Milk powders, butt er and spreads, UHT products, cream

Koroit:Butt er, milk powders and associated products

Tasmania Edith Creek:UHT products

Devondale dairy regions and processing plants

ROCHESTER

COBRAM

KIEWA

MAFFRALEONGATHA

KOROIT

MELBOURNE

PORT OFMELBOURNE X 2

LAVERTON

ADELAIDENSW

SA

EDITH CREEK

QLD

NSW

SA

NT

WA

VIC

TAS

VIC

181244 138319 286 148220 393 464 393132 313 376 451 130281 366 504 600 500 413

•Melbourne•Rochester

•Cobram•Kiewa

•Maffra•Leongatha

•Koroit

DISTANCE BETWEEN PROCESSING PLANTS IN KILOMETRES

MG milk collection areas

Murray River

Goulburn River

Processing plant

Head of�ce

Logistics centres

Retail and Food Service

MG Nutritionals

MG Trading

Ingredients

Pantone PMS 1795 C Pantone PMS 364 C


•A significant financial support offering (paid as an investment rebate) for young farmers, farming families and new entrants seeking to grow their business, proactively manage succession or enter the dairy industry

•Access to employment and immigration resources to address labour market shortages, including immigration advice to assist Devondale suppliers recruit farm employees

•Leasing partnerships to offer Devondale suppliers or new entrants an alternative to bank debt for business opportunities or industry entry

•Medium and short-term finance to assist with cash flow management and business sustainability, as well as upgrades to milk vats for improved farm and supply chain efficiency

•The option to open up longer-term credit lines at Devondale’s MG Trading stores for purchases such as seed, fodder and fertiliser

Milk payment system at a glanceDevondale offers its dairy farmer-suppliers a single base milk price structure, complemented by a series of incentives that reward off-peak milk production, milk production growth and efficiency improvements.

The main elements are as follows:

•Single base price: A single base price tailored to each month of the year will be announced at the start of the financial year. Suppliers can also take up incentives to reflect the different value of milk across the year.

•Flat milk incentive: The flat milk incentive (formerly the domestic incentive) recognises the value of committed milk during the off-peak period.

•Growth incentive: The growth incentive recognises the value of additional milk supplied to Devondale. Part of this additional value is distributed back to those supplier-shareholders who provide the growth milk to Devondale.

•Productivity incentive: The productivity incentive recognises scale efficiencies in milk collection for Devondale.

•Volume and collection charges: The volume charge reflects cost to Devondale in haulage and processing milk of varying composition, while the collection charge reflects the costs associated with each milk collection.

* The incentive payments are calculated and paid on only qualifying milk solids that are of Premium 1, Premium 2 and Base quality. They are loyalty-based payments and require the supplier-shareholder to be actively supplying Devondale at the time of payment or deemed by Devondale to have legitimately retired.

Share equityAs members of Devondale, dairy-farmer suppliers contribute to a share equity scheme based on the volume of milk supplied.

This equity assists Devondale to make capital investments. It also aids in the research and development of new products in order for the co-operative to grow its position in the international and domestic markets.

Benefits of supplying Devondale

Shares are valued at $1 per share and may be sold (on exiting) for $1. The co-op manages a monthly share offtake scheme in which suppliers are paid the equivalent of $0.065 per litre in shares.

All suppliers contribute to the scheme which allows them to develop a considerable shareholding over their time with the co-operative.

Dividends may be paid annually on all ‘ordinary’ class shares and suppliers may elect for this dividend to be paid in cash or reinvested into more shares.

Next Generation initiativesDevondale’s Next Generation package is designed to assist new and established Devondale dairy farmer-suppliers tackle key challenges and make the most of business opportunities.

It helps suppliers realise their goals, from getting established as a dairy operator and developing their workforce, through to managing a sustainable business and succession of the family farm.

Exclusive to Devondale suppliers, the Next Generation package includes:

Devondale remains 100 per cent controlled by its dairy farmer-shareholders. The co-operative plays a vital part in the daily lives of dairy farming families through milk pricing, on-farm collection, on-farm services, MG Trading Stores, information services, finance and the share office.

Regionally-located field service teams maintain strong relationships with dairy farmer suppliers and support queries relating to farm income estimates, finance, milk quality and share matters.


Devondale in the regionsDevondale dairy farmer-suppliers are located across south eastern Australia. In this section, we provide a snapshot of the four key regions: •NorthernVictoriaandsouthernNewSouthWales•Gippsland •South-westVictoria•SouthAustralia


IrrigationNorthern Victoria is reliant on irrigation to grow the high quality pastures for which the region is renowned.

There are two main irrigation schemes in the region –Murray and Goulburn – and several smaller schemes. Each irrigation scheme is given an allocation as a percentage of the water entitlement. The irrigation season typically extends from 15 August to 15 May. While flood irrigation is the predominant method of watering, there are also travelling irrigators, pivots and subsurface drip in use.

This region is the third largest dairying region in Australia, straddling the Murray River from the Victorian Alps to Swan Hill. It covers the Northern Irrigation and north-east regions of Victoria, and the Riverina and Upper Murray region of New South Wales.

AgricultureAgriculture and associated value-adding processing industries are the key drivers of the regional economy with dairy being the biggest player.

The region has sufficient economic mass to support a large industry network allowing for easy access to the key services required for the operation of dairy farms.

Climate The southern Riverina and northern Victorian regions enjoy a true Mediterranean

climate, with low humidity and high sunlight hours.

Recent drier than normal seasonal conditions, have led to a focus on high water use to feed conversion crops or pasture. Other strategies include irrigating annual pasture or crops in autumn and spring to maximise rain-assisted growth and also growing high-producing summer crops such as sorghum, millet and maize to fill the feed gap in summer.

Cereals such as oats, barley, wheat and vetch are commonly grown for grazing and fodder conservation along with lucerne, ryegrass and clover.

Northern Victoria and southern New South Wales

Key facts2012 2011

Milk production (ml)* 2167 1866

Average farm output (ml) 1.792 1.615

Average herd size 253 287

Expected % change in herd next year 48 58

Expected % plan more output in 3 years 4.3 5.2

% positive about dairy 77 74

% plan investment next year 43 54

Source: Dairy Australia Situation and Outlook 2012. Based on the 2012 National Dairy Farmer Survey.


Gippsland

AgricultureGippsland’s economy is based on primary production and secondary processing. Dairy is the largest agribusiness industry in Gippsland, with milk production accounting for half the value of Gippsland’s agricultural commodities. Beef farming is also a large industry in Gippsland, producing about quarter of Victoria’s beef.

ClimateGippsland is well suited to dairying with a mild temperature and a rainfall variation of 500mm to over 1200mm annually. The Strzelecki Ranges and south Gippsland have reliable high rainfall. Towards east Gippsland the rainfall reduces and irrigation becomes a key part of the dairying system.

Irrigation East Gippsland requires some irrigation to supplement summer and autumn rainfall. Average water use is approximately 6.5 megalitres per hectare using flood irrigation. The only irrigation system in Gippsland is the Macalister Irrigation District which is fed from the reliable water supply of Glenmaggie Reservoir. Farms are entitled to the announced percentage of their water entitlement. The irrigation season typically extends from 15 August to 15 May.

Key facts2012 2011




Expected % change in herd next year 1.0 4.5

Expected % plan more output in 3 years 49 42




The Gippsland dairy region is located in south-east Victoria, extending west towards Melbourne and north to the New South Wales border. The region produces about 20% of Australia’s milk from a mixture of rainfall and irrigated dairy systems.


South-west Victoria

AgricultureAgriculture and associated value-adding processing industries are the key drivers of the regional economy and dairy is the biggest player. The industry has sufficient economic mass to support a large service industry which allows for easy access to the key services required for the operation of dairy farms.

ClimateThe climate of south-west Victoria is mild with warm summers and cool winters. Rainfall is higher in the winter months.

IrrigationSouth-west Victoria is based predominantly on dryland (rain fed) pasture. Rainfall across the region varies from 625mm to over 1250mm. Approximately 10 per cent of farms are irrigated by spray irrigators from underground aquifers with an estimated average water use of 6 megalitres per hectare.

Key facts2012 2011





Expected % plan more output in 3 years 44 42




The south-west region is dominated by primary industry and represents about one third of Victoria’s dairy industry. The region stretches from Geelong in the east through to the South Australian border and from the rugged southern coastline up to Ballarat and Hamilton in western Victoria.


South Australia

AgricultureAgriculture, forestry and associated value-adding processing industries are the key drivers of the regional economy. Dairy, grapes and grazing are all big agricultural players.

ClimateSouth Australia enjoys generally lower rainfall, with low humidity and high sunlight hours.

IrrigationMany areas in South Australia utilise irrigation to grow high quality pastures. Spray irrigation is used in most areas using the “centre pivot” system. Some fl ood irrigation occurs on the Murray swamps around Murray Bridge/Tailem Bend. In the south east, water allocation has been based on a per hectare per farm basis.

Key facts2012 2011





Expected % plan more output in 3 years 44 50% positive about dairy 62 45% plan investment next year 33 37

Source: Dairy Australia Situation and Outlook 2012. Based on the 2012 National Dairy Farmer Survey

Th e dairy regions of South Australia are the most diverse in Australia.From north of Adelaide to the Fleurieu Peninsula in the south, most dairy farmers operate in a dryland environment. In the expanding southeast dairy area, pasture growth relies on use of spray irrigation. Th e south east of South- Australia is one of Australia’s highest producing dairying areas on a milk solids per cow and per hectare basis.

20

COBRAM Phone: +61 (0) 3 5871 0222John Furphy (Field Services Manager - Northeast) Phone: + 61 (0)417 343 361 Email: [email protected]

KIEWA Phone: +61 (0) 2 6027 9200Rodney Petering (Field Services Officer) Phone: +61 (0)428 993 395 Email: [email protected]

KOROIT Phone: +61 (0) 3 5561 9700Meaghan Johnston (Field Services Manager - Koroit West Region) Phone: +61 (0)408 995 142 Email: [email protected] Morrow (Field Services Manager - Koroit East Region) Phone: +61 (0) 418 589 758 Email: [email protected] Haynes (Field Services Manager - Support Services) Phone: +61 (0)417 554 772 Email: [email protected]

LEITCHVILLE Phone: +61 (0) 3 5451 7111Neil Ennis (Field Services Officer) Phone: +61 (0)417 862 185 Email: [email protected]

Kristen Murphy (Field Services Officer) Phone: +61 (0)417 397 953 Email: [email protected]

LEONGATHA Phone: +61 (0) 3 5662 9666Tim Cross (Field Services Manager - Leongatha) Phone: +61 (0)408 522 856 Email: [email protected]

MAFFRA Phone: +61 (0) 3 5147 0777Gregor Allen (Field Services Manager - Maffra) Phone: +61 (0)417 017 705 Email: [email protected]

ROCHESTER Phone: 61 (0) 3 5484 0222Scott Wells (Field Services Manager - Northwest)Phone: +61 (0) 417 861 260 Email: [email protected]

Contact us

Copyright: Murray Goulburn Co-operative Co. Limited 2013Murray Goulburn Co-operative Co. Limited.Freshwater PlaceLevel 15, 2 Southbank BoulevardSouthbank Victoria 3006 AustraliaPh: +61 (03) 9040 5000www.mgc.com.au

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