Citizens Electoral Council of Australia

Media Release Monday, 23 May 2016

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au

Statement from CEC candidates Chris Lahy for Mallee and Jeff Davy for Murray:

Dairy emergency—Australia needs parity pricing for agriculture

The essential nature of agriculture, especially fresh milk production, means that it is not just another industry—the government has the same duty of care to ensure the nation’s food security by keeping family farmers in production as it does to ensure a clean water supply.

It is urgent, therefore, that Australia implement a system of parity pricing for agricultural products, so that family farmers are never forced to wear prices that are below the cost of production.

The present crisis in the dairy industry among suppliers to Murray-Goulburn and Fonterra, who have suddenly suffered steep price cuts to well below their production costs, is a symptom of the disastrous free market ideology that has sabotaged Australian agriculture over the past three decades. Australian farmers were thrown to the free trade wolves, forced to “compete” on local and global markets that are anything but “free”.

Locally, under the misnamed “competition policy” enforced by the ACCC, the Coles-Woolworths duopoly has been able to expand to the behemoth it is today by devouring all in its path and giving take-it-or-leave-it prices to suppliers who have had nowhere else to go. The power of this duopoly is such that the two retailers have been able to stage a fake price war over milk at $1 per litre, which has had no connection to the actual and varying costs of production; the farmers, not the retailers, have worn the cost of this price war.

Globally, the commodities trade is distorted by speculation and cartels. Farm prices are exposed to rapid currency shifts on the foreign exchange market, which is dominated by speculation—less than one per cent of transactions relate to actual trade in goods; in 2014 a number of London banks were caught rigging the global forex market. Speculation in commodities futures also distorts the market. Financial deregulation since the year 2000 has allowed Wall Street and City of London banks, led by Goldman Sachs, to funnel a massive volume of speculative money into commodities trading, which disconnected prices from any relationship to the cost of production and real demand. Farmers are also at the mercy of giant multinational food conglomerates, which have cartel powers to dictate low prices.

The toll that this free trade fraud has exacted on Australian agriculture was documented in a paper by economist Ben Rees presented to the 2012 Rural debt Roundtable entitled Rural Australia: Crisis 2012, which illustrates the essence of the crisis with a graph showing the relative growth of total Rural Debt and total Net Value Farm Production (NVFP) since 1969. That year, more than 200,000 family farms in Australia collectively produced an annual output with a value of around $1 billion and carried a combined debt of $1 billion. By 2011, the value of farm output was $12 billion, while combined farm debt had soared to around $65 billion. Worse, the number of family farms carrying that debt collapsed to less than 40,000! The debt is even greater today.

Parity pricing

The long-term solution for dairy farmers, and all Australian agriculture, is parity pricing, as it operated in the US during and just after WWII, when by legislation farmers were guaranteed a price that covered their cost of production. The Congress legislated parity pricing to help the war effort, in two ways: to guarantee food security; and to boost national income. The architect of the scheme, Carl Wilken, proved that every dollar earned on farms generated $7 in national income—the highest multiple of any sector. Parity pricing worked so brilliantly that farm borrowing dropped dramatically, because the farmers were able to finance their crops and production from farm income; this is known as the Golden Era for US agriculture. The Wall Street banks, unhappy that farmers were not having to beg them for loans, lobbied Congress to end the scheme in 1952.

Parity pricing removes the volatility in agriculture pricing, which is good for producers and consumers. Only speculators desire market volatility, because they look for extreme price fluctuations as opportunities to extract profits.

(Click here for a 4-page PDF of a 2013 address by US farm leader Frank Endres explaining the parity pricing scheme.)

The CEC is fighting to revitalise Australia’s productive industries, which are the backbone of a prosperous economy. Along with parity pricing, the CEC will achieve this through a Glass-Steagall separation of banking that services the real economy from speculation, which will keep investment in the productive sector; and a government-owned and -directed national bank to create masses of new credit for investment in infrastructure development and production.

To save Australia’s industries, support the CEC:

Click here for a free copy of the CEC’s New Citizen Special Report: “The Infrastructure Road to Recovery”, which details the CEC’s vision to reindustrialise Australia.

Click here to join the CEC as a member.

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