From one generation to the next

Haidee VandenbergheCountryman

Peter and Margaret Giumelli

When Peter and Margaret Giumelli married in 1970, the dairy industry was completely different to the one before them today.

Margaret describes her husband as a dyed-in-the-wool dairy farmer, and Peter concedes he never wanted to do anything else.

Initially working with Peter's family's dairy business, the young couple set about expanding their operation.

"We borrowed to the eyeballs to buy a small property… which had a fairly small dairy, the throughput was about 28 cows an hour," Peter said.

"We purchased the property and its cattle - there were about 80 - and a tractor and a set of discs.

"But the belief was that it was all about growth.

"While quotas were good and the prices were guaranteed, the increases were always well below the Consumer Price Index - if we got half of (the rise) we thought we were doing well.

"The implication of that was your productivity had to go up.

"You had to produce more milk or you'd be struggling to stand still, so growth was the order of the day."

Until 2000, the Giumellis operated under the quota system, and although the couple say it did little to increase the sector's efficiency, the quota system allowed them to expand with certainty.

"The quota was worth producing - it was quite profitable and you could bank it," Peter said.

"Basically you knew you were going to get that income but anything over that quota was worth very little, we're talking 10 cents a litre.

"Banks liked to see quotas - the more quota you had, the more they were happy to lend to you.

"There were some other issues. If you bought a property with a quota on it, it was factored into the land, so it made the land more expensive.

"That was a negative, but the surety of the quota system meant you could budget on repayments without any real risk and that was what we did."

But while the quota system might have offered dairy farmers stability, the wider economic climate did not.

"Debt has been our biggest challenge," Peter said.

"If we didn't keep our heads down, tails up we would have sunk. In fact, the first three years it was very much touch and go because we'd borrowed with basically no deposit."

Interest rates hit 17 per cent, and then continued to climb to almost 20 per cent, and Peter and Margaret admit the debt burden nearly spelt the end of the business.

But it wasn't just interest rates that were high, grain prices meant feed rations were much lower.

"Grain cost relative to milk return was much higher then," Peter said.

"We were paying $250 a tonne for lupins in the 1970s. So you couldn't afford to use too much of it.

"We peak at about 12kg of grain a cow now, whereas in those days if you fed 4kg that was a huge amount."

Despite the challenges during Peter and Margaret's career in dairying, industry morale has for the most part been high.

However, that's something the couple has seen ebb since deregulation.

By the time the industry was starting to approach deregulation, their son Michael had decided to come back to the farm.

Peter said he was "proud as punch" to have a son interested in taking over, but Peter and Margaret weren't without their concerns.

"It was the year of deregulation (2000)," Peter said.

"We knew we were going to take a downturn in income. It was then a case of surviving on what sort of contracts we had with the processors.

"We were thinking if (Michael) didn't (take over), we would have exited the industry at about that time."

Nevertheless, the family has stayed with the dairy industry and is proud of what they have achieved.

"We got up to about 250 cows at the Ferguson property, now we're 350 to 380 at Benger," Peter said.

"We've got to continue to grow, because in actual fact the real price (of milk) has gone down substantially.

"You've just got to run faster - the only future is to get your productivity up. We've done that by investing in technology and machinery that will help our productivity around the whole farm, not just in the dairy."

Michael and Sophia Giumelli

By contrast, Michael's entire dairy career has been in the spectre of deregulation.

For his parents and their generation, the dairy industry was distinguished by its stability.

But it's now marked by its volatility and plagued by a waning industry morale.

When Michael returned to the dairy in 2000, the idea was to turn the challenges presented by deregulation into positives through increasing productivity and expansion.

"The idea was keep your fixed costs the same and get bigger and make a margin that way," Michael said.

"But it became evident that the bigger you got, the more debt you got and the more stressful it became.

"Now, it's just take everyday as it comes. We're just doing what we do and hoping an outside factor will change things one way or another."

While Peter might have milked 83 cows at a rate of about 28 an hour when he and Margaret first started out, technological advances mean Michael and Sophia can milk 350 to 380 cows at a rate of 220 an hour.

However, Michael readily admits the industry is going through a crisis of confidence spurred on by successive challenges, including the collapse of Challenge Dairy and the supermarkets' one dollar a litre milk campaign.

"Dairy farmers are selling heifers to pay bills. It's a sad reality. That's not sustainable either," Michael said.

"There's a lot of doom and gloom, but you can't get hung up on it.

"You can get people that can bring you down, you can't be around people that are negative the whole time because you just get depressed yourself.

"Probably our biggest concern in the short term is the duopoly of the two supermarkets and the incredible power they have, over not just the dairy industry but primary producers as a whole.

"That and climate change are our biggest challenges to come."

Margins are tight at the moment, but the young farmers believe the current dairy climate is simply a down cycle before better times.

Michael is adamant the industry is poised to capitalise on opportunities emerging in South East Asia and further abroad due to rising concerns around food security.

"With a growing food shortage in the world and Asia so close, it's a big opportunity for us," he said.

"We've got to grow our potential here and promote it to the rest of the world, and build a better relationship between the country and the city.

"Back when mum and dad were kids that existed, but now people think Coles has a very big dairy farm."

Nevertheless, Michael and Sophia said they were at the mercy of external forces, meaning decisions about the future direction of the business were temporarily on hold.

"We haven't made a decision as to where we're headed," Michael said.

"Some days I don't want to grow any more, some days I get excited and want to.

"We don't know what direction we want to take."

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