1. How farmers are dealing with volatility Max Roberts Chairman

2. Volatility in the dairy industry Volatility is nothing new for our industry High input industry that is highly exposed to trade 45% of production exported, significant imports Farm gate prices are driven by international markets International market accounts for just 7% of world milk production Dairy trade is highly distorted by Nth Hemisphere policies On farm, bought in feed accounts for 30% of cash costs Subject to grain and hay market volatility

3. International dairy commodity prices Source: Dairy Australia

4. Income volatility – Source: ABARE

5. Income volatility – not just milk price Source: DA and ABARE

6. Volatility and uncertainty is increasing Farm Financial People Physical External environment Grain Water Fuel Fertilizer Inputs Exchange rates Economic conditions Govt policies Community attitudes New technologies Weather Interest rates

7. How are farmers dealing with volatility Dairy is a highly adaptable production system Water vs grain & supplements Strategic use of inputs – water, fertiliser Diversified feed sources – new supplements & crops An integrated supply chain Longer term strategic relationships – forward contracts Options for selling milk - contract vs supply agreement Relationship with dairy companies Prioritising business resilience Whole of farm planning and scenario testing Production not the key objective A longer term view of profitability and wealth creation

8. Increasing use of FMDs At 30 September 2009 3,707 dairy farmers held Farm Management Deposits totalling $214 million Source: DAFF

9. Typical Australian dairy production system ? A continuum of systems operating across Australia Many farms feature elements of all these systems - more flexible and opportunistic Rain-fed pastureIrrigated pastureSupplementary grain & concentrate feeding Feedlot

10. A range of feeding systems Source: National Dairy Farmer Survey 2009

11. Highly adaptable production systems An integrated supply chain Prioritising business resilience How are farmers dealing with volatility

12. How is the industry responding? Good risk management requires an understanding of the external environment Dairy Moving Forward – Taking Stock Dealing with Today, Planning for Tomorrow (DAFF) DairyLIVE Situation & Outlook Grain & Hay report Building capability NCDEA People in Dairy

13. Dairy Moving Forward – Taking Stock 3000 Taking Stock sessions since 2004 Service providers trained Collaboration with DAFF DPIV dairy companies service providers

14. DairyLIVE Linking the industry through technology Cost effective Access to international expertise Funding from DAFF Optimising networking and information reach

15. Situation and Outlook Whole of supply chain analysis Shared understanding of operating environment Communicated via reports and presentations Wide target audience Farmers Service providers Government

16. Farmers dealing with volatility The industry is developing the tools and information to help farmers: Understand the context Understand the total farm position Test against potential scenarios to find the fault lines Farmers are highly professional business owners Employ 5 to 6 employees Generate enormous economic benefits

17. The way forward Opportunity is out there The industry has proved it’s ability to compete and adapt Well positioned to benefit from future demand growth Farmers will continue to adapt to volatility Farms must run as a business Require clear signals and information Continue to build capability Policy settings will play an important role Certainty of access to resources Regulation